þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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MICHIGAN
(State or other jurisdiction of incorporation or organization)
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38-1999511
(I.R.S. Employer Identification No.)
|
|
25505 WEST TWELVE MILE ROAD
SOUTHFIELD, MICHIGAN
(Address of principal executive offices)
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48034-8339
(Zip Code)
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
(Do not check if a smaller reporting company)
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Smaller reporting company o
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PART I. — FINANCIAL INFORMATION
|
||||
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
|
||||
PART II. — OTHER INFORMATION
|
||||
(In millions, except share and per share data)
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As of
|
|||||||
March 31, 2013
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December 31, 2012
|
|||||||
(Unaudited)
|
||||||||
ASSETS:
|
||||||||
Cash and cash equivalents
|
$
|
7.8
|
$
|
9.0
|
||||
Restricted cash and cash equivalents
|
116.3
|
92.4
|
||||||
Restricted securities available for sale
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47.5
|
46.1
|
||||||
Loans receivable (including $6.5 and $5.9 from affiliates as of March 31, 2013 and December 31, 2012, respectively)
|
2,210.3
|
2,109.9
|
||||||
Allowance for credit losses
|
(181.7
|
)
|
(176.4
|
)
|
||||
Loans receivable, net
|
2,028.6
|
1,933.5
|
||||||
Property and equipment, net
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22.0
|
22.2
|
||||||
Income taxes receivable
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0.6
|
1.1
|
||||||
Other assets
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25.5
|
28.9
|
||||||
Total Assets
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$
|
2,248.3
|
$
|
2,133.2
|
||||
LIABILITIES AND SHAREHOLDERS' EQUITY:
|
||||||||
Liabilities:
|
||||||||
Accounts payable and accrued liabilities
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$
|
105.2
|
$
|
105.8
|
||||
Revolving secured line of credit
|
115.9
|
43.5
|
||||||
Secured financing
|
885.8
|
853.0
|
||||||
Mortgage note
|
4.0
|
4.0
|
||||||
Senior notes
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350.3
|
350.3
|
||||||
Deferred income taxes, net
|
137.5
|
148.4
|
||||||
Income taxes payable
|
25.0
|
6.3
|
||||||
Total Liabilities
|
1,623.7
|
1,511.3
|
||||||
Commitments and Contingencies - See Note 14
|
||||||||
Shareholders' Equity:
|
||||||||
Preferred stock, $.01 par value, 1,000,000 shares authorized, none issued
|
–
|
–
|
||||||
Common stock, $.01 par value, 80,000,000 shares authorized, 23,587,496 and 24,114,896 shares issued and outstanding as of March 31, 2013 and December 31, 2012, respectively
|
0.2
|
0.2
|
||||||
Paid-in capital
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54.5
|
53.4
|
||||||
Retained earnings
|
569.9
|
568.4
|
||||||
Accumulated other comprehensive loss
|
–
|
(0.1
|
)
|
|||||
Total Shareholders' Equity
|
624.6
|
621.9
|
||||||
Total Liabilities and Shareholders' Equity
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$
|
2,248.3
|
$
|
2,133.2
|
(In millions, except share and per share data)
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For the Three Months Ended March 31,
|
|||||||
2013
|
2012
|
|||||||
Revenue:
|
||||||||
Finance charges
|
$
|
142.9
|
$
|
126.1
|
||||
Premiums earned
|
12.0
|
10.8
|
||||||
Other income
|
9.8
|
5.5
|
||||||
Total revenue
|
164.7
|
142.4
|
||||||
Costs and expenses:
|
||||||||
Salaries and wages
|
21.9
|
19.4
|
||||||
General and administrative
|
7.9
|
7.4
|
||||||
Sales and marketing
|
9.0
|
7.8
|
||||||
Provision for credit losses
|
5.8
|
5.2
|
||||||
Interest
|
16.0
|
15.2
|
||||||
Provision for claims
|
9.0
|
8.6
|
||||||
Total costs and expenses
|
69.6
|
63.6
|
||||||
Income before provision for income taxes
|
95.1
|
78.8
|
||||||
Provision for income taxes
|
34.5
|
28.5
|
||||||
Net income
|
$
|
60.6
|
$
|
50.3
|
||||
Net income per share:
|
||||||||
Basic
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$
|
2.49
|
$
|
1.92
|
||||
Diluted
|
$
|
2.48
|
$
|
1.92
|
||||
Weighted average shares outstanding:
|
||||||||
Basic
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24,330,027
|
26,157,672
|
||||||
Diluted
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24,426,127
|
26,283,801
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(In millions)
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For the Three Months Ended March 31,
|
|||||||
2013
|
2012
|
|||||||
Net income
|
$
|
60.6
|
$
|
50.3
|
||||
Other comprehensive income, net of tax:
|
||||||||
Unrealized gain on securities, net of tax of $0.1 for 2013
|
0.1
|
–
|
||||||
Other comprehensive income
|
0.1
|
–
|
||||||
Comprehensive income
|
$
|
60.7
|
$
|
50.3
|
(In millions)
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For the Three Months Ended March 31,
|
|||||||
2013
|
2012
|
|||||||
Cash Flows From Operating Activities:
|
||||||||
Net income
|
$
|
60.6
|
$
|
50.3
|
||||
Adjustments to reconcile cash provided by operating activities:
|
||||||||
Provision for credit losses
|
5.8
|
5.2
|
||||||
Depreciation
|
1.4
|
1.2
|
||||||
Amortization
|
1.8
|
1.6
|
||||||
(Benefit) provision for deferred income taxes
|
(11.0
|
)
|
5.9
|
|||||
Stock-based compensation
|
1.5
|
0.8
|
||||||
Change in operating assets and liabilities:
|
||||||||
(Decrease) increase in accounts payable and accrued liabilities
|
(0.6
|
)
|
11.5
|
|||||
Decrease in income taxes receivable
|
0.5
|
0.1
|
||||||
Increase in income taxes payable
|
18.7
|
11.5
|
||||||
Decrease in other assets
|
2.2
|
1.0
|
||||||
Net cash provided by operating activities
|
80.9
|
89.1
|
||||||
Cash Flows From Investing Activities:
|
||||||||
Increase in restricted cash and cash equivalents
|
(23.9
|
)
|
(55.4
|
)
|
||||
Purchases of restricted securities available for sale
|
(21.8
|
)
|
–
|
|||||
Proceeds from sale of restricted securities available for sale
|
4.0
|
–
|
||||||
Maturities of restricted securities available for sale
|
16.4
|
–
|
||||||
Principal collected on Loans receivable
|
345.5
|
310.9
|
||||||
Advances to Dealers
|
(378.6
|
)
|
(374.4
|
)
|
||||
Purchases of Consumer Loans
|
(27.9
|
)
|
(34.8
|
)
|
||||
Accelerated payments of Dealer Holdback
|
(9.5
|
)
|
(12.9
|
)
|
||||
Payments of Dealer Holdback
|
(30.0
|
)
|
(33.2
|
)
|
||||
Net increase in other loans
|
(0.4
|
)
|
–
|
|||||
Purchases of property and equipment
|
(1.2
|
)
|
(3.9
|
)
|
||||
Net cash used in investing activities
|
(127.4
|
)
|
(203.7
|
)
|
||||
Cash Flows From Financing Activities:
|
||||||||
Borrowings under revolving secured line of credit
|
595.2
|
607.5
|
||||||
Repayments under revolving secured line of credit
|
(522.8
|
)
|
(477.8
|
)
|
||||
Proceeds from secured financing
|
312.6
|
492.4
|
||||||
Repayments of secured financing
|
(279.8
|
)
|
(487.1
|
)
|
||||
Principal payments under mortgage note
|
–
|
(0.1
|
)
|
|||||
Payments of debt issuance costs
|
(0.4
|
)
|
(1.8
|
)
|
||||
Repurchase of common stock
|
(59.7
|
)
|
(20.0
|
)
|
||||
Proceeds from stock options exercised
|
–
|
0.2
|
||||||
Tax benefits from stock-based compensation plans
|
0.2
|
1.3
|
||||||
Net cash provided by financing activities
|
45.3
|
114.6
|
||||||
Net decrease in cash and cash equivalents
|
(1.2
|
)
|
–
|
|||||
Cash and cash equivalents, beginning of period
|
9.0
|
4.7
|
||||||
Cash and cash equivalents, end of period
|
$
|
7.8
|
$
|
4.7
|
||||
Supplemental Disclosure of Cash Flow Information:
|
||||||||
Cash paid during the period for interest
|
$
|
22.2
|
$
|
13.4
|
||||
Cash paid during the period for income taxes
|
$
|
25.7
|
$
|
9.7
|
Quarter Ended
|
Portfolio Program
|
Purchase Program
|
||||
March 31, 2012
|
93.3
|
%
|
6.7
|
%
|
||
June 30, 2012
|
93.6
|
%
|
6.4
|
%
|
||
September 30, 2012
|
93.8
|
%
|
6.2
|
%
|
||
December 31, 2012
|
94.0
|
%
|
6.0
|
%
|
||
March 31, 2013
|
94.4
|
%
|
5.6
|
%
|
·
|
a down payment from the consumer;
|
·
|
a non-recourse cash payment (“advance”) from us; and
|
·
|
after the advance has been recovered by us, the cash from payments made on the Consumer Loan, net of certain collection costs and our servicing fee (“Dealer Holdback”).
|
·
|
First, to reimburse us for certain collection costs;
|
·
|
Second, to pay us our servicing fee, which generally equals 20% of collections;
|
·
|
Third, to reduce the aggregate advance balance and to pay any other amounts due from the Dealer to us; and
|
·
|
Fourth, to the Dealer as payment of Dealer Holdback.
|
·
|
the consumer and Dealer have signed a Consumer Loan contract;
|
·
|
we have received the original Consumer Loan contract and supporting documentation;
|
·
|
we have approved all of the related stipulations for funding; and
|
·
|
we have provided funding to the Dealer in the form of either an advance under the Portfolio Program or one-time purchase payment under the Purchase Program.
|
·
|
the aggregate amount of all cash advances paid;
|
·
|
finance charges;
|
·
|
Dealer Holdback payments;
|
·
|
accelerated Dealer Holdback payments; and
|
·
|
recoveries.
|
·
|
collections (net of certain collection costs); and
|
·
|
write-offs.
|
·
|
the aggregate amount of all amounts paid during the month of purchase to purchase Consumer Loans from Dealers;
|
·
|
finance charges; and
|
·
|
recoveries.
|
·
|
collections (net of certain collection costs); and
|
·
|
write-offs.
|
(In millions)
|
For the Three Months Ended March 31,
|
|||||||
2013
|
2012
|
|||||||
Net assumed written premiums
|
$
|
16.3
|
$
|
16.3
|
||||
Net premiums earned
|
12.0
|
10.8
|
||||||
Provision for claims
|
9.0
|
8.6
|
||||||
Amortization of capitalized acquisition costs
|
0.3
|
0.3
|
(In millions)
|
As of
|
||||||||
Balance Sheet location
|
March 31, 2013
|
December 31, 2012
|
|||||||
Trust assets
|
Restricted cash and cash equivalents
|
$
|
2.4
|
$
|
2.2
|
||||
Trust assets
|
Restricted securities available for sale
|
47.5
|
46.1
|
||||||
Unearned premium
|
Accounts payable and accrued liabilities
|
40.0
|
35.7
|
||||||
Claims reserve (1)
|
Accounts payable and accrued liabilities
|
1.5
|
1.4
|
|
(1)
|
The claims reserve is estimated based on historical claims experience.
|
·
|
First, we determined that the trusts qualified as variable interest entities. The trusts have insufficient equity at risk as no parties to the trusts were required to contribute assets that provide them with any ownership interest.
|
·
|
Next, we determined that we have variable interests in the trusts. We have a residual interest in the assets of the trusts, which is variable in nature, given that it increases or decreases based upon the actual loss experience of the related service contracts. In addition, VSC Re is required to absorb any losses in excess of the trusts’ assets.
|
·
|
Next, we evaluated the purpose and design of the trusts. The primary purpose of the trusts is to provide third party product providers (“TPPPs”) with funds to pay claims on vehicle service contracts and to accumulate and provide us with proceeds from investment income and residual funds.
|
·
|
Finally, we determined that we are the primary beneficiary of the trusts. We control the amount of premium written and placed in the trusts through Consumer Loan assignments under our Programs, which is the activity that most significantly impacts the economic performance of the trusts. We have the right to receive benefits from the trusts that could potentially be significant. In addition, VSC Re has the obligation to absorb losses of the trusts that could potentially be significant.
|
(In millions)
|
As of
|
||||||
March 31, 2013
|
December 31, 2012
|
||||||
Cash related to secured financings
|
$ | 113.8 | $ | 90.2 | |||
Cash held in trusts for future vehicle service contract claims (1)
|
2.5 | 2.2 | |||||
Total restricted cash and cash equivalents
|
$ | 116.3 | $ | 92.4 |
|
(1)
|
The unearned premium and claims reserve associated with the trusts are included in accounts payable and accrued liabilities in the consolidated balance sheets. As of March 31, 2013, the outstanding cash balance includes $2.4 million related to VSC Re. As of December 31, 2012, the outstanding cash balance includes $2.2 million related to VSC Re.
|
(In millions)
|
As of March 31, 2013
|
||||||||||||||
Cost
|
Gross Unrealized Gains
|
Gross Unrealized Losses
|
Estimated Fair Value
|
||||||||||||
US Government and agency securities
|
$
|
21.4
|
$
|
–
|
$
|
(0.1
|
)
|
$
|
21.3
|
||||||
Commercial paper
|
19.9
|
–
|
–
|
19.9
|
|||||||||||
Corporate bonds
|
3.1
|
–
|
–
|
3.1
|
|||||||||||
Certificates of deposit
|
3.2
|
–
|
–
|
3.2
|
|||||||||||
Total restricted securities available for sale
|
$
|
47.6
|
$
|
–
|
$
|
(0.1
|
)
|
$
|
47.5
|
(In millions)
|
As of December 31, 2012
|
||||||||||||||
Cost
|
Gross Unrealized Gains
|
Gross Unrealized Losses
|
Estimated Fair Value
|
||||||||||||
US Government and agency securities
|
$ | 20.6 | $ | – | $ | (0.1 | ) | $ | 20.5 | ||||||
Commercial paper
|
18.9 | – | (0.1 | ) | 18.8 | ||||||||||
Corporate bonds
|
3.3 | – | – | 3.3 | |||||||||||
Certificates of deposit
|
3.3 | – | – | 3.3 | |||||||||||
Foreign Government bonds
|
0.2 | – | – | 0.2 | |||||||||||
Total restricted securities available for sale
|
$ | 46.3 | $ | – | $ | (0.2 | ) | $ | 46.1 |
(In millions)
|
As of
|
||||||||||||
March 31, 2013
|
December 31, 2012
|
||||||||||||
Cost
|
Estimated Fair Value
|
Cost
|
Estimated Fair Value
|
||||||||||
Contractual Maturity
|
|||||||||||||
Within one year
|
$ | 35.0 | $ | 34.9 | $ | 33.8 | $ | 33.7 | |||||
Over one year to five years
|
8.9 | 8.9 | 8.6 | 8.6 | |||||||||
Over five years to ten years
|
3.7 | 3.7 | 3.9 | 3.8 | |||||||||
Total restricted securities available for sale
|
$ | 47.6 | $ | 47.5 | $ | 46.3 | $ | 46.1 |
(In millions)
|
As of March 31, 2013
|
|||||||||||
Dealer Loans
|
Purchased Loans
|
Total
|
||||||||||
Loans receivable
|
$ | 1,973.1 | $ | 237.2 | $ | 2,210.3 | ||||||
Allowance for credit losses
|
(172.9 | ) | (8.8 | ) | (181.7 | ) | ||||||
Loans receivable, net
|
$ | 1,800.2 | $ | 228.4 | $ | 2,028.6 | ||||||
(In millions)
|
As of December 31, 2012
|
|||||||||||
Dealer Loans
|
Purchased Loans
|
Total
|
||||||||||
Loans receivable
|
$ | 1,869.4 | $ | 240.5 | $ | 2,109.9 | ||||||
Allowance for credit losses
|
(167.4 | ) | (9.0 | ) | (176.4 | ) | ||||||
Loans receivable, net
|
$ | 1,702.0 | $ | 231.5 | $ | 1,933.5 |
(In millions)
|
For the Three Months Ended March 31, 2013
|
|||||||||||
Dealer Loans
|
Purchased Loans
|
Total
|
||||||||||
Balance, beginning of period
|
$
|
1,869.4
|
$
|
240.5
|
$
|
2,109.9
|
||||||
New Consumer Loan assignments (1)
|
378.6
|
27.9
|
406.5
|
|||||||||
Principal collected on Loans receivable
|
(309.3
|
)
|
(36.2
|
)
|
(345.5
|
)
|
||||||
Accelerated Dealer Holdback payments
|
9.5
|
–
|
9.5
|
|||||||||
Dealer Holdback payments
|
30.0
|
–
|
30.0
|
|||||||||
Transfers (2)
|
(5.0
|
)
|
5.0
|
–
|
||||||||
Write-offs
|
(1.1
|
)
|
–
|
(1.1
|
)
|
|||||||
Recoveries (3)
|
0.6
|
–
|
0.6
|
|||||||||
Net change in other loans
|
0.4
|
–
|
0.4
|
|||||||||
Balance, end of period
|
$
|
1,973.1
|
$
|
237.2
|
$
|
2,210.3
|
||||||
(In millions)
|
For the Three Months Ended March 31, 2012
|
|||||||||||
Dealer Loans
|
Purchased Loans
|
Total
|
||||||||||
Balance, beginning of period
|
$
|
1,506.5
|
$
|
246.4
|
$
|
1,752.9
|
||||||
New Consumer Loan assignments (1)
|
374.4
|
34.8
|
409.2
|
|||||||||
Principal collected on Loans receivable
|
(269.7
|
)
|
(41.2
|
)
|
(310.9
|
)
|
||||||
Accelerated Dealer Holdback payments
|
12.9
|
–
|
12.9
|
|||||||||
Dealer Holdback payments
|
33.2
|
–
|
33.2
|
|||||||||
Transfers (2)
|
(5.2
|
)
|
5.2
|
–
|
||||||||
Write-offs
|
(0.6
|
)
|
(0.1
|
)
|
(0.7
|
)
|
||||||
Recoveries (3)
|
0.6
|
–
|
0.6
|
|||||||||
Balance, end of period
|
$
|
1,652.1
|
$
|
245.1
|
$
|
1,897.2
|
|
(1)
|
The Dealer Loans amount represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program. The Purchased Loans amount represents one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.
|
|
(2)
|
Under our Portfolio Program, certain events may result in Dealers forfeiting their rights to Dealer Holdback. We transfer the Dealer’s outstanding Dealer Loan balance to Purchased Loans in the period this forfeiture occurs.
|
(In millions)
|
For the Three Months Ended March 31, 2013
|
|||||||||||
Dealer Loans
|
Purchased Loans
|
Total
|
||||||||||
Balance, beginning of period
|
$
|
602.9
|
$
|
115.2
|
$
|
718.1
|
||||||
New Consumer Loan assignments (1)
|
163.6
|
11.7
|
175.3
|
|||||||||
Finance charge income
|
(124.1
|
)
|
(18.8
|
)
|
(142.9
|
)
|
||||||
Forecast changes
|
(0.2
|
)
|
3.0
|
2.8
|
||||||||
Transfers (2)
|
(2.2
|
)
|
3.3
|
1.1
|
||||||||
Balance, end of period
|
$
|
640.0
|
$
|
114.4
|
$
|
754.4
|
||||||
(In millions)
|
For the Three Months Ended March 31, 2012
|
|||||||||||
Dealer Loans
|
Purchased Loans
|
Total
|
||||||||||
Balance, beginning of period
|
$
|
508.0
|
$
|
120.1
|
$
|
628.1
|
||||||
New Consumer Loan assignments (1)
|
157.7
|
16.1
|
173.8
|
|||||||||
Finance charge income
|
(105.7
|
)
|
(20.4
|
)
|
(126.1
|
)
|
||||||
Forecast changes
|
3.5
|
0.7
|
4.2
|
|||||||||
Transfers (2)
|
(2.4
|
)
|
3.9
|
1.5
|
||||||||
Balance, end of period
|
$
|
561.1
|
$
|
120.4
|
$
|
681.5
|
|
(1)
|
The Dealer Loans amount represents the net cash flows expected at the time of assignment on Consumer Loans assigned under our Portfolio Program, less the related advances paid to Dealers. The Purchased Loans amount represents the net cash flows expected at the time of assignment on Consumer Loans assigned under our Purchase Program, less the related one-time payments made to Dealers.
|
|
(2)
|
Under our Portfolio Program, certain events may result in Dealers forfeiting their rights to Dealer Holdback. We transfer the Dealer’s outstanding Dealer Loan balance and related expected future net cash flows to Purchased Loans in the period this forfeiture occurs.
|
(In millions)
|
For the Three Months Ended March 31, 2013
|
|||||||||
Dealer Loans
|
Purchased Loans
|
Total
|
||||||||
Contractual net cash flows at the time of assignment (1)
|
$
|
578.6
|
$
|
54.8
|
$
|
633.4
|
||||
Expected net cash flows at the time of assignment (2)
|
542.1
|
39.7
|
581.8
|
|||||||
Fair value at the time of assignment (3)
|
378.6
|
27.9
|
406.5
|
|||||||
(In millions)
|
For the Three Months Ended March 31, 2012
|
|||||||||
Dealer Loans
|
Purchased Loans
|
Total
|
||||||||
Contractual net cash flows at the time of assignment (1)
|
$
|
576.0
|
$
|
71.2
|
$
|
647.2
|
||||
Expected net cash flows at the time of assignment (2)
|
532.0
|
50.9
|
582.9
|
|||||||
Fair value at the time of assignment (3)
|
374.4
|
34.8
|
409.2
|
|
(1)
|
The Dealer Loans amount represents the repayments that we were contractually owed at the time of assignment on Consumer Loans assigned under our Portfolio Program, less the related Dealer Holdback payments that we would be required to make if we collected all of the contractual repayments. The Purchased Loans amount represents the repayments that we were contractually owed at the time of assignment on Consumer Loans assigned under our Purchase Program.
|
|
(2)
|
The Dealer Loans amount represents the repayments that we expected to collect at the time of assignment on Consumer Loans assigned under our Portfolio Program, less the related Dealer Holdback payments that we expected to make. The Purchased Loans amount represents the repayments that we expected to collect at the time of assignment on Consumer Loans assigned under our Purchase Program.
|
|
(3)
|
The Dealer Loans amount represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program. The Purchased Loans amount represents one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.
|
Forecasted Collection Percentage as of (1)
|
Variance in Forecasted Collection Percentage from
|
||||||||||||||
Consumer Loan
Assignment Year
|
March 31,
2013
|
December 31,
2012
|
Initial
Forecast
|
December 31,
2012
|
Initial
Forecast
|
||||||||||
2004
|
73.1 | % | 73.0 | % | 73.0 | % | 0.1 | % | 0.1 | % | |||||
2005
|
73.6 | % | 73.6 | % | 74.0 | % | 0.0 | % | -0.4 | % | |||||
2006
|
69.9 | % | 69.9 | % | 71.4 | % | 0.0 | % | -1.5 | % | |||||
2007
|
68.0 | % | 68.0 | % | 70.7 | % | 0.0 | % | -2.7 | % | |||||
2008
|
70.4 | % | 70.3 | % | 69.7 | % | 0.1 | % | 0.7 | % | |||||
2009
|
79.5 | % | 79.5 | % | 71.9 | % | 0.0 | % | 7.6 | % | |||||
2010
|
77.4 | % | 77.3 | % | 73.6 | % | 0.1 | % | 3.8 | % | |||||
2011
|
74.2 | % | 74.1 | % | 72.5 | % | 0.1 | % | 1.7 | % | |||||
2012
|
72.7 | % | 72.2 | % | 71.4 | % | 0.5 | % | 1.3 | % |
(1)
|
Represents the total forecasted collections we expect to collect on the Consumer Loans as a percentage of the repayments that we were contractually owed on the Consumer Loans at the time of assignment. Contractual repayments include both principal and interest.
|
(In millions)
|
As of March 31, 2013
|
||||||||||||||||||||
Loan Pool Performance Meets or Exceeds Initial Estimates
|
Loan Pool Performance Less than Initial Estimates
|
||||||||||||||||||||
Dealer
Loans
|
Purchased
Loans
|
Total
|
Dealer
Loans
|
Purchased
Loans
|
Total
|
||||||||||||||||
Loans receivable
|
$ | 567.7 | $ | 211.3 | $ | 779.0 | $ | 1,405.4 | $ | 25.9 | $ | 1,431.3 | |||||||||
Allowance for credit losses
|
– | – | – | (172.9 | ) | (8.8 | ) | (181.7 | ) | ||||||||||||
Loans receivable, net
|
$ | 567.7 | $ | 211.3 | $ | 779.0 | $ | 1,232.5 | $ | 17.1 | $ | 1,249.6 | |||||||||
(In millions)
|
As of December 31, 2012
|
||||||||||||||||||||
Loan Pool Performance Meets or Exceeds Initial Estimates
|
Loan Pool Performance Less than Initial Estimates
|
||||||||||||||||||||
Dealer
Loans
|
Purchased
Loans
|
Total
|
Dealer
Loans
|
Purchased
Loans
|
Total
|
||||||||||||||||
Loans receivable
|
$ | 564.1 | $ | 205.8 | $ | 769.9 | $ | 1,305.3 | $ | 34.7 | $ | 1,340.0 | |||||||||
Allowance for credit losses
|
– | – | – | (167.4 | ) | (9.0 | ) | (176.4 | ) | ||||||||||||
Loans receivable, net
|
$ | 564.1 | $ | 205.8 | $ | 769.9 | $ | 1,137.9 | $ | 25.7 | $ | 1,163.6 |
(In millions)
|
For the Three Months Ended March 31, 2013
|
|||||||||||
Dealer Loans
|
Purchased Loans
|
Total
|
||||||||||
Balance, beginning of period
|
$
|
167.4
|
$
|
9.0
|
$
|
176.4
|
||||||
Provision for credit losses
|
6.0
|
(0.2
|
)
|
5.8
|
||||||||
Write-offs
|
(1.1
|
)
|
–
|
(1.1
|
)
|
|||||||
Recoveries (1)
|
0.6
|
–
|
0.6
|
|||||||||
Balance, end of period
|
$
|
172.9
|
$
|
8.8
|
$
|
181.7
|
||||||
(In millions)
|
For the Three Months Ended March 31, 2012
|
|||||||||||
Dealer Loans
|
Purchased Loans
|
Total
|
||||||||||
Balance, beginning of period
|
$
|
141.7
|
$
|
12.6
|
$
|
154.3
|
||||||
Provision for credit losses
|
6.6
|
(1.4
|
)
|
5.2
|
||||||||
Write-offs
|
(0.6
|
)
|
(0.1
|
)
|
(0.7
|
)
|
||||||
Recoveries (1)
|
0.6
|
–
|
0.6
|
|||||||||
Balance, end of period
|
$
|
148.3
|
$
|
11.1
|
$
|
159.4
|
(1)
|
Represents collections received on previously written off Loans.
|
(Dollars in millions)
|
||||||||||||
Financings
|
Wholly-owned Subsidiary
|
Close Date
|
Maturity Date
|
Financing Amount
|
Interest Rate as of
March 31, 2013
|
|||||||
Revolving Secured Line of Credit
|
n/a
|
06/15/2012
|
06/22/2015
|
$
|
235.0
|
At our option, either LIBOR plus 187.5 basis points or the prime rate plus 87.5 basis points
|
||||||
Warehouse Facility II (1)
|
CAC Warehouse Funding Corp. II
|
12/27/2012
|
12/27/2015
|
(2)
|
$
|
325.0
|
Commercial paper rate or LIBOR plus 200 basis points (3)
|
|||||
Warehouse Facility III (1)
|
CAC Warehouse Funding III, LLC
|
06/29/2012
|
09/10/2015
|
(4)
|
$
|
75.0
|
LIBOR plus 160 basis points (3)
|
|||||
Warehouse Facility IV (1)
|
CAC Warehouse Funding LLC IV
|
08/19/2011
|
02/19/2014
|
(2)
|
$
|
75.0
|
LIBOR plus 275 basis points (3)
|
|||||
Term ABS 2010-1 (1)
|
Credit Acceptance Funding LLC 2010-1
|
11/04/2010
|
10/15/2012
|
(2)
|
$
|
100.5
|
Fixed rate
|
|||||
Term ABS 2011-1 (1)
|
Credit Acceptance Funding LLC 2011-1
|
10/06/2011
|
09/16/2013
|
(2)
|
$
|
200.5
|
Fixed rate
|
|||||
Term ABS 2012-1 (1)
|
Credit Acceptance Funding LLC 2012-1
|
03/29/2012
|
03/17/2014
|
(2)
|
$
|
201.3
|
Fixed rate
|
|||||
Term ABS 2012-2 (1)
|
Credit Acceptance Funding LLC 2012-2
|
09/20/2012
|
09/15/2014
|
(2)
|
$
|
252.0
|
Fixed rate
|
|||||
Senior Notes
|
n/a
|
(5)
|
02/01/2017
|
$
|
350.0
|
Fixed rate
|
|
(1)
|
Financing made available only to a specified subsidiary of the Company.
|
|
(2)
|
Represents the revolving maturity date. The outstanding balance will amortize after the maturity date based on the cash flows of the pledged assets.
|
|
(3)
|
Interest rate cap agreements are in place to limit the exposure to increasing interest rates.
|
|
(4)
|
Represents the revolving maturity date. The outstanding balance will amortize after the revolving maturity date and any amounts remaining on September 10, 2017 will be due.
|
|
(5)
|
The close dates associated with the issuance of $250.0 million and $100.0 million of the Senior Notes were on February 1, 2010 and March 3, 2011, respectively.
|
(In millions)
|
For the Three Months Ended March 31,
|
|||||||
2013
|
2012
|
|||||||
Revolving Secured Line of Credit
|
||||||||
Maximum outstanding balance
|
$
|
179.3
|
$
|
185.5
|
||||
Average outstanding balance
|
73.3
|
102.7
|
||||||
Warehouse Facility II
|
||||||||
Maximum outstanding balance
|
$
|
153.6
|
$
|
177.2
|
||||
Average outstanding balance
|
90.0
|
158.9
|
||||||
Warehouse Facility III
|
||||||||
Maximum outstanding balance
|
$
|
–
|
$
|
73.0
|
||||
Average outstanding balance
|
–
|
67.3
|
||||||
Warehouse Facility IV
|
||||||||
Maximum outstanding balance
|
$
|
39.6
|
$
|
39.6
|
||||
Average outstanding balance
|
37.7
|
37.9
|
(Dollars in millions)
|
As of
|
|||||||
March 31, 2013
|
December 31, 2012
|
|||||||
Revolving Secured Line of Credit
|
||||||||
Balance outstanding
|
$
|
115.9
|
$
|
43.5
|
||||
Amount available for borrowing (1)
|
119.1
|
191.5
|
||||||
Interest rate
|
2.23
|
%
|
2.08
|
%
|
||||
Warehouse Facility II
|
||||||||
Balance outstanding
|
$
|
142.1
|
$
|
81.3
|
||||
Amount available for borrowing (1)
|
182.9
|
243.7
|
||||||
Loans pledged as collateral
|
217.2
|
105.2
|
||||||
Restricted cash and cash equivalents pledged as collateral
|
4.3
|
3.0
|
||||||
Interest rate
|
2.20
|
%
|
2.22
|
%
|
||||
Warehouse Facility III
|
||||||||
Balance outstanding
|
$
|
–
|
$
|
–
|
||||
Amount available for borrowing (1)
|
75.0
|
75.0
|
||||||
Loans pledged as collateral
|
–
|
–
|
||||||
Restricted cash and cash equivalents pledged as collateral
|
0.3
|
0.4
|
||||||
Interest rate
|
1.80
|
%
|
1.82
|
%
|
||||
Warehouse Facility IV
|
||||||||
Balance outstanding
|
$
|
37.6
|
$
|
37.6
|
||||
Amount available for borrowing (1)
|
37.4
|
37.4
|
||||||
Loans pledged as collateral
|
48.3
|
47.7
|
||||||
Restricted cash and cash equivalents pledged as collateral
|
3.4
|
2.5
|
||||||
Interest rate
|
2.95
|
%
|
2.96
|
%
|
||||
Term ABS 2010-1
|
||||||||
Balance outstanding
|
$
|
52.3
|
$
|
80.3
|
||||
Loans pledged as collateral
|
96.5
|
111.6
|
||||||
Restricted cash and cash equivalents pledged as collateral
|
14.5
|
12.5
|
||||||
Interest rate
|
2.64
|
%
|
2.44
|
%
|
||||
Term ABS 2011-1
|
||||||||
Balance outstanding
|
$
|
200.5
|
$
|
200.5
|
||||
Loans pledged as collateral
|
243.4
|
243.8
|
||||||
Restricted cash and cash equivalents pledged as collateral
|
30.4
|
23.5
|
||||||
Interest rate
|
2.90
|
%
|
2.90
|
%
|
||||
Term ABS 2012-1
|
||||||||
Balance outstanding
|
$
|
201.3
|
$
|
201.3
|
||||
Loans pledged as collateral
|
244.0
|
244.7
|
||||||
Restricted cash and cash equivalents pledged as collateral
|
28.8
|
22.3
|
||||||
Interest rate
|
2.38
|
%
|
2.38
|
%
|
||||
Term ABS 2012-2
|
||||||||
Balance outstanding
|
$
|
252.0
|
$
|
252.0
|
||||
Loans pledged as collateral
|
310.2
|
311.9
|
||||||
Restricted cash and cash equivalents pledged as collateral
|
32.1
|
26.0
|
||||||
Interest rate
|
1.63
|
%
|
1.63
|
%
|
||||
Senior Notes
|
||||||||
Balance outstanding (2)
|
$
|
350.3
|
$
|
350.3
|
||||
Interest rate
|
9.13
|
%
|
9.13
|
%
|
(1)
|
Availability may be limited by the amount of assets pledged as collateral.
|
(2)
|
As of March 31, 2013 and December 31, 2012, the outstanding balance presented for the Senior Notes includes a net unamortized debt premium of $0.3 million.
|
(Dollars in millions)
|
|||||||
Term ABS Financings
|
Close Date
|
Net Book Value of Loans
Contributed at Closing
|
Revolving Period
|
||||
Term ABS 2010-1
|
November 4, 2010
|
$
|
126.8
|
24 months (Through October 15, 2012)
|
|||
Term ABS 2011-1
|
October 6, 2011
|
$
|
250.8
|
24 months (Through September 16, 2013)
|
|||
Term ABS 2012-1
|
March 29, 2012
|
$
|
251.7
|
24 months (Through March 17, 2014)
|
|||
Term ABS 2012-2
|
September 20, 2012
|
$
|
315.1
|
24 months (Through September 15, 2014)
|
As of March 31, 2013 and December 31, 2012
|
||||||||||||||||
Facility
(in millions)
|
Facility Name
|
Purpose
|
Start
|
End
|
Notional
(in millions)
|
Cap Interest Rate (1)
|
||||||||||
$
|
325.0
|
Warehouse Facility II
|
Cap Floating Rate
|
07/2011
|
06/2013
|
$
|
325.0
|
6.75
|
%
|
|||||||
75.0
|
Warehouse Facility III
|
Cap Floating Rate
|
09/2010
|
09/2013
|
37.5
|
6.75
|
%
|
|||||||||
75.0
|
Warehouse Facility III
|
Cap Floating Rate
|
06/2012
|
07/2015
|
18.8
|
(2)
|
5.00
|
%
|
||||||||
75.0
|
Warehouse Facility IV
|
Cap Floating Rate
|
08/2011
|
09/2015
|
75.0
|
5.50
|
%
|
(1)
|
Rate excludes the spread over the LIBOR rate or the commercial paper rate, as applicable.
|
(2)
|
The notional amount increases to $56.3 million in September 2013 when the original Warehouse Facility III interest rate cap for $37.5 million ends.
|
(In millions)
|
||||||||||||||||
As of March 31, 2013
|
As of December 31, 2012
|
|||||||||||||||
Carrying Amount
|
Estimated Fair Value
|
Carrying Amount
|
Estimated Fair Value
|
|||||||||||||
Assets
|
||||||||||||||||
Cash and cash equivalents
|
$
|
7.8
|
$
|
7.8
|
$
|
9.0
|
$
|
9.0
|
||||||||
Restricted cash and cash equivalents
|
116.3
|
116.3
|
92.4
|
92.4
|
||||||||||||
Restricted securities available for sale
|
47.5
|
47.5
|
46.1
|
46.1
|
||||||||||||
Net investment in Loans receivable
|
2,028.6
|
2,044.7
|
1,933.5
|
1,951.4
|
||||||||||||
Liabilities
|
||||||||||||||||
Revolving secured line of credit
|
$
|
115.9
|
$
|
115.9
|
$
|
43.5
|
$
|
43.5
|
||||||||
Secured financing
|
885.8
|
872.8
|
853.0
|
863.0
|
||||||||||||
Mortgage note
|
4.0
|
4.0
|
4.0
|
4.0
|
||||||||||||
Senior notes
|
350.3
|
380.6
|
350.3
|
381.9
|
Level 1
|
Valuation is based upon quoted prices for identical instruments traded in active markets.
|
Level 2
|
Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
|
Level 3
|
Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates or assumptions that market participants would use in pricing the asset or liability.
|
(In millions)
|
|||||||||||||
As of March 31, 2013
|
|||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total Fair Value
|
||||||||||
Assets
|
|||||||||||||
Cash and cash equivalents
|
$ | 7.8 | $ | – | $ | – | $ | 7.8 | |||||
Restricted cash and cash equivalents
|
116.3 | – | – | 116.3 | |||||||||
Restricted securities available for sale
|
27.6 | 19.9 | – | 47.5 | |||||||||
Net investment in Loans receivable
|
– | – | 2,044.7 | 2,044.7 | |||||||||
Liabilities
|
|||||||||||||
Revolving secured line of credit
|
$ | – | $ | 115.9 | $ | – | $ | 115.9 | |||||
Secured financing
|
– | 872.8 | – | 872.8 | |||||||||
Mortgage note
|
– | 4.0 | – | 4.0 | |||||||||
Senior notes
|
380.6 |