cacc-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)


☑						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022


☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-20202

CREDIT ACCEPTANCE CORPORATION

(Exact name of registrant as specified in its charter)


Michigan		38-1999511
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
25505 W. Twelve Mile Road
Southfield,	Michigan	48034-8339
(Address of principal executive offices)		(Zip Code)

(248) 353-2700

(Registrant’s telephone number, including area code)


			Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, $.01 par value

CACC

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

The number of shares of Common Stock, $.01 par value, outstanding on April 25, 2022 was 13,139,579.

TABLE OF CONTENTS


PART I. — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Consolidated Balance Sheets - As of March 31, 2022 and December 31, 2021			1

Consolidated Statements of Income - Three months ended March 31, 2022 and 2021			2

Consolidated Statements of Comprehensive Income - Three months ended March 31, 2022 and 2021			3

Consolidated Statements of Shareholders' Equity - Three months ended March 31, 2022 and 2021			4

Consolidated Statements of Cash Flows - Three months ended March 31, 2022 and 2021			5

Notes to Consolidated Financial Statements			6

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			42

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			55

ITEM 4. CONTROLS AND PROCEDURES			55

PART II. — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS			56

ITEM 1A. RISK FACTORS			56

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			57

ITEM 6. EXHIBITS			58

SIGNATURES			59

Table of Contents

PART I. - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CREDIT ACCEPTANCE CORPORATION

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


(Dollars in millions, except per share data)	As of
	March 31, 2022		December 31, 2021
ASSETS:
Cash and cash equivalents	$	17.6	$	23.3
Restricted cash and cash equivalents	481.1		410.9
Restricted securities available for sale	62.4		62.1

Loans receivable	9,198.0		9,349.8
Allowance for credit losses	(2,870.8)		(3,013.5)
Loans receivable, net	6,327.2		6,336.3

Property and equipment, net	56.7		57.3
Income taxes receivable	52.9		109.2
Other assets	40.4		51.8
Total Assets	$	7,038.3	$	7,050.9

LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Accounts payable and accrued liabilities	$	224.5	$	175.0
Revolving secured line of credit	104.7		2.6
Secured financing	3,832.4		3,811.5
Senior notes	792.5		792.5
Mortgage note	9.4		9.7
Deferred income taxes, net	445.8		435.2
Income taxes payable	0.2		0.2
Total Liabilities	5,409.5		5,226.7

Commitments and Contingencies - See Note 15
Shareholders' Equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized, none issued	—		—
Common stock, $.01 par value, 80,000,000 shares authorized, 13,363,783 and 14,145,888 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively	0.1		0.1
Paid-in capital	211.5		197.2
Retained earnings	1,418.7		1,626.7
Accumulated other comprehensive income (loss)	(1.5)		0.2
Total Shareholders' Equity	1,628.8		1,824.2
Total Liabilities and Shareholders' Equity	$	7,038.3	$	7,050.9

See accompanying notes to consolidated financial statements.

Table of Contents

CREDIT ACCEPTANCE CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)


(Dollars in millions, except per share data)	For the Three Months Ended March 31,
	2022		2021
Revenue:
Finance charges	$	424.1	$	424.9
Premiums earned	13.8		14.4
Other income	17.8		11.7
Total revenue	455.7		451.0
Costs and expenses:
Salaries and wages	64.4		49.3
General and administrative	18.9		46.1
Sales and marketing	19.2		17.2
Provision for credit losses	23.3		21.3
Interest	36.5		43.8
Provision for claims	8.9		9.0

Total costs and expenses	171.2		186.7
Income before provision for income taxes	284.5		264.3
Provision for income taxes	70.2		62.2
Net income	$	214.3	$	202.1
Net income per share:
Basic	$	15.02	$	11.85
Diluted	$	14.94	$	11.82
Weighted average shares outstanding:
Basic	14,268,518		17,060,944
Diluted	14,341,523		17,099,058

See accompanying notes to consolidated financial statements.

Table of Contents

CREDIT ACCEPTANCE CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


(In millions)	For the Three Months Ended March 31,
	2022		2021
Net income	$	214.3	$	202.1
Other comprehensive loss, net of tax:
Unrealized loss on securities, net of tax	(1.7)		(0.7)
Other comprehensive loss	(1.7)		(0.7)
Comprehensive income	$	212.6	$	201.4

See accompanying notes to consolidated financial statements.

Table of Contents

CREDIT ACCEPTANCE CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(UNAUDITED)


(Dollars in millions)	For the Three Months Ended March 31, 2022
	Common Stock			Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Shareholders' Equity
	Number	Amount
Balance, beginning of period	14,145,888	$	0.1	$	197.2	$	1,626.7	$	0.2	$	1,824.2
Net income	—	—		—		214.3		—		214.3
Other comprehensive loss	—	—		—		—		(1.7)		(1.7)
Stock-based compensation	—	—		9.1		—		—		9.1
Restricted stock forfeitures	—	—		—		—		—		—
Repurchase of common stock	(803,735)	—		(0.7)		(422.3)		—		(423.0)
Restricted stock units converted to common stock	3,980	—		—		—		—		—
Stock options exercised	17,650	—		5.9		—		—		5.9
Balance, end of period	13,363,783	$	0.1	$	211.5	$	1,418.7	$	(1.5)	$	1,628.8

(Dollars in millions)	For the Three Months Ended March 31, 2021
	Common Stock			Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Shareholders' Equity
	Number	Amount
Balance, beginning of period	17,092,432	$	0.2	$	161.9	$	2,138.8	$	1.6	$	2,302.5
Net income	—	—		—		202.1		—		202.1
Other comprehensive loss	—	—		—		—		(0.7)		(0.7)
Stock-based compensation	—	—		1.1		—		—		1.1
Restricted stock forfeitures	(18)	—		—		—		—		—
Repurchase of common stock	(393,408)	—		(1.3)		(133.9)		—		(135.2)
Restricted stock units converted to common stock	11,416	—		—		—		—		—
Balance, end of period	16,710,422	$	0.2	$	161.7	$	2,207.0	$	0.9	$	2,369.8

See accompanying notes to consolidated financial statements.

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CREDIT ACCEPTANCE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


(In millions)	For the Three Months Ended March 31,
	2022		2021
Cash Flows From Operating Activities:
Net income	$	214.3	$	202.1
Adjustments to reconcile cash provided by operating activities:
Provision for credit losses	23.3		21.3
Depreciation	2.3		2.4
Amortization	4.3		4.1
Provision for deferred income taxes	11.0		12.9
Stock-based compensation	9.1		1.1

Other	0.1		(0.1)
Change in operating assets and liabilities:
Increase in accounts payable and accrued liabilities	43.1		24.0
Decrease in income taxes receivable	56.3		48.7

Decrease in other assets	12.3		8.7
Net cash provided by operating activities	376.1		325.2
Cash Flows From Investing Activities:
Purchases of restricted securities available for sale	(11.4)		(11.8)
Proceeds from sale of restricted securities available for sale	5.4		5.2
Maturities of restricted securities available for sale	3.4		3.5
Principal collected on Loans receivable	961.9		973.0
Advances to Dealers	(633.8)		(647.1)
Purchases of Consumer Loans	(289.7)		(385.2)
Accelerated payments of Dealer Holdback	(9.4)		(10.4)
Payments of Dealer Holdback	(43.2)		(39.0)
Purchases of property and equipment	(1.7)		(0.8)
Net cash used in investing activities	(18.5)		(112.6)
Cash Flows From Financing Activities:
Borrowings under revolving secured line of credit	697.8		807.6
Repayments under revolving secured line of credit	(595.7)		(903.5)
Proceeds from secured financing	211.7		728.8
Repayments of secured financing	(193.8)		(521.3)


Payments of debt issuance costs	(0.8)		(7.6)
Repurchase of common stock	(423.0)		(135.2)
Proceeds from stock options exercised	5.9		—
Other	4.8		6.6
Net cash used in financing activities	(293.1)		(24.6)
Net increase in cash and cash equivalents and restricted cash and cash equivalents	64.5		188.0
Cash and cash equivalents and restricted cash and cash equivalents beginning of period	434.2		396.2
Cash and cash equivalents and restricted cash and cash equivalents end of period	$	498.7	$	584.2
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest	$	33.6	$	41.5
Cash paid during the period for income taxes, net of refunds	$	0.6	$	—

See accompanying notes to consolidated financial statements.

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles” or “GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for interim periods are not necessarily indicative of actual results achieved for full fiscal years. The consolidated balance sheet as of December 31, 2021 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2021 for Credit Acceptance Corporation (the “Company”, “Credit Acceptance”, “we”, “our” or “us”).

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

We have evaluated events and transactions occurring subsequent to the consolidated balance sheet date of March 31, 2022 for items that could potentially be recognized or disclosed in these financial statements. We did not identify any items that would require disclosure in or adjustment to the consolidated financial statements.