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Credit Acceptance Corp.$451.71($1.01)(.22%)

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 Credit Acceptance Announces Fourth Quarter and Full Year 2017 Earnings
   Tuesday, January 30, 2018 4:07:43 PM ET

Credit Acceptance Corporation (CACC ) (referred to as the "Company", "Credit Acceptance", "we", "our", or "us") today announced consolidated net income of $177.1 million, or $9.10 per diluted share, for the three months ended December 31, 2017 compared to consolidated net income of $87.6 million, or $4.33 per diluted share, for the same period in 2016. For the year ended December 31, 2017, consolidated net income was $470.2 million, or $24.04 per diluted share, compared to consolidated net income of $332.8 million, or $16.31 per diluted share, for the same period in 2016.

Our GAAP financial results reflect the enactment of the Tax Cuts and Jobs Act in December 2017, which increased consolidated net income by $99.8 million, or $5.13 and $5.10 per diluted share, respectively, for the three months and year ended December 31, 2017.

Adjusted net income, a non-GAAP financial measure, for the three months ended December 31, 2017 was $100.5 million, or $5.16 per diluted share, compared to $96.7 million, or $4.79 per diluted share, for the same period in 2016. For the year ended December 31, 2017, adjusted net income was $399.8 million, or $20.44 per diluted share, compared to adjusted net income of $360.6 million, or $17.67 per diluted share, for the same period in 2016.

Webcast Details

We will host a webcast on January 30, 2018 at 5:00 p.m. Eastern Time to answer questions related to our fourth quarter and full year results. The webcast can be accessed live by visiting the "Investor Relations" section of our website at creditacceptance.com or by dialing 877-303-2904. Additionally, a replay and transcript of the webcast will be archived in the "Investor Relations" section of our website.

Consumer Loan Metrics

Dealers assign retail installment contracts (referred to as "Consumer Loans") to Credit Acceptance. At the time a Consumer Loan is submitted to us for assignment, we forecast future expected cash flows from the Consumer Loan. Based on the amount and timing of these forecasts and expected expense levels, an advance or one-time purchase payment is made to the related dealer at a price designed to maximize economic profit, a non-GAAP financial measure that considers our return on capital, our cost of capital and the amount of capital invested.

We use a statistical model to estimate the expected collection rate for each Consumer Loan at the time of assignment. We continue to evaluate the expected collection rate of each Consumer Loan subsequent to assignment. Our evaluation becomes more accurate as the Consumer Loans age, as we use actual performance data in our forecast. By comparing our current expected collection rate for each Consumer Loan with the rate we projected at the time of assignment, we are able to assess the accuracy of our initial forecast. The following table compares our forecast of Consumer Loan collection rates as of December 31, 2017, with the forecasts as of September 30, 2017, as of December 31, 2016 and at the time of assignment, segmented by year of assignment:

                               Forecasted Collection Percentage as of (1)                           Current Forecast Variance from
Consumer Loan Assignment Year  December 31, 2017  September 30, 2017  December 31, 2016  Initial    September 30, 2017  December 31, 2016  Initial
                                                                                         Forecast                                          Forecast
2008                           70.5     %         70.5      %         70.4     %         69.7 %     0.0       %         0.1      %         0.8  %
2009                           79.5     %         79.5      %         79.4     %         71.9 %     0.0       %         0.1      %         7.6  %
2010                           77.6     %         77.6      %         77.6     %         73.6 %     0.0       %         0.0      %         4.0  %
2011                           74.7     %         74.7      %         74.7     %         72.5 %     0.0       %         0.0      %         2.2  %
2012                           73.8     %         73.8      %         73.7     %         71.4 %     0.0       %         0.1      %         2.4  %
2013                           73.5     %         73.5      %         73.4     %         72.0 %     0.0       %         0.1      %         1.5  %
2014                           71.7     %         71.7      %         71.8     %         71.8 %     0.0       %         -0.1     %         -0.1 %
2015                           65.5     %         65.5      %         66.1     %         67.7 %     0.0       %         -0.6     %         -2.2 %
2016                           64.8     %         64.9      %         65.1     %         65.4 %     -0.1      %         -0.3     %         -0.6 %
2017 (2)                       65.6     %         65.5      %         --                 64.0 %     0.1       %         --                 1.6  %

(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. Forecasted collection rates are negatively impacted by canceled Consumer Loans as the contractual amount owed is not removed from the denominator for purposes of computing forecasted collection rates in the table.

(2) The forecasted collection rate for 2017 Consumer Loans as of December 31, 2017 includes both Consumer Loans that were in our portfolio as of September 30, 2017 and Consumer Loans assigned during the most recent quarter. The following table provides forecasted collection rates for each of these segments:

                                            Forecasted Collection Percentage as of                   Current Forecast Variance from
2017 Consumer Loan Assignment Period        December 31, 2017  September 30, 2017  Initial Forecast  September 30, 2017  Initial Forecast
January 1, 2017 through September 30, 2017  65.7     %         65.5      %         64.1     %        0.2       %         1.6      %
October 1, 2017 through December 31, 2017   65.3     %         --                  63.8     %        --                  1.5      %

Consumer Loans assigned in 2009 through 2013 and 2017 have yielded forecasted collection results materially better than our initial estimates, while Consumer Loans assigned in 2015 have yielded forecasted collection results materially worse than our initial estimates. For Consumer Loans assigned in 2008, 2014 and 2016, actual results have been close to our initial estimates. For the three months ended December 31, 2017, forecasted collection rates improved for Consumer Loans assigned in 2017 and were generally consistent with expectations at the start of the period for all other assignment years presented. For the year ended December 31, 2017, forecasted collection rates improved for Consumer Loans assigned in 2017, declined for Consumer Loans assigned in 2015 and 2016 and were generally consistent with expectations at the start of the period for all other assignment years presented.

The changes in forecasted collection rates for the three months and year ended December 31, 2017 and 2016 impacted forecasted net cash flows (forecasted collections less forecasted dealer holdback payments) as follows:

(In millions)                                     For the Three Months Ended December 31,  For the Years Ended December 31,
Increase (decrease) in forecasted net cash flows  2017          2016                       2017            2016
Dealer loans                                      $     1.2     $     (14.3 )              $    (5.6 )     $    (35.4 )
Purchased loans                                   12.5          0.4                        41.7            15.3
Total loans                                       $     13.7    $     (13.9 )              $    36.1       $    (20.1 )

In addition to the statistical model used to forecast collection rates, we use a model to forecast the timing of future net cash flows. During the fourth quarter of 2017, we updated our net cash flow timing model to incorporate more recent data. The revised forecast resulted in an expected cash flow stream with a lower net present value as compared to the prior forecast, as less cash flows are expected in earlier periods and more cash flows are expected in later periods.

The reduction in net present value was primarily the result of a change in the expected timing of cash flows from longer-term Consumer Loans. Due to our limited historical experience with longer-term Consumer Loans, our prior model relied on extrapolations from the historical performance of shorter-term Consumer Loans to predict the timing of future net cash flows on longer-term Consumer Loans. We now have additional historical experience on these longer-term loans which we used to refine our estimate.

The revision to our net cash flow timing forecast does not impact the amount of undiscounted net cash flows we expect to receive. As a result, the dollar amount of future net portfolio revenue (finance charges less provision for credit losses) is not impacted by the revision. However, the revision does impact the period in which those net revenues will be recorded. The revision impacts GAAP and adjusted results differently.

For GAAP results, a portion of the impact of the revised timing estimate was recorded as a current period expense and a portion was recorded as a yield adjustment. For the fourth quarter of 2017, the revision increased provision for credit losses by $41.6 million, reduced finance charge revenue by $7.3 million and reduced net income by $30.8 million. The revision reduced the GAAP yield on our loan portfolio by 90 basis points, which will impact the timing of revenue recognition in future periods.

For adjusted results, the entire impact of the revised timing estimate was recorded as a yield adjustment. For the fourth quarter of 2017, the revision reduced adjusted finance charge revenue and adjusted net income by $12.1 million and $7.6 million, respectively. The revision reduced the adjusted yield on our loan portfolio by 140 basis points, which will impact the timing of revenue recognition in future periods.

The following table presents information on the average Consumer Loan assignment for each of the last 10 years:

                               Average
Consumer Loan Assignment Year  Consumer Loan (1)  Advance (2) Initial Loan Term (in months)
2008                           $      14,518      $    6,479  42
2009                           12,689             5,565       38
2010                           14,480             6,473       41
2011                           15,686             7,137       46
2012                           15,468             7,165       47
2013                           15,445             7,344       47
2014                           15,692             7,492       47
2015                           16,354             7,272       50
2016                           18,218             7,976       53
2017 (3)                       20,230             8,746       55

(1) Represents the repayments that we were contractually owed on Consumer Loans at the time of assignment, which include both principal and interest.

(2) Represents advances paid to dealers on Consumer Loans assigned under our portfolio program and one-time payments made to dealers to purchase Consumer Loans assigned under our purchase program. Payments of dealer holdback and accelerated dealer holdback are not included.

(3) The averages for 2017 Consumer Loans include both Consumer Loans that were in our portfolio as of September 30, 2017 and Consumer Loans assigned during the most recent quarter. The following table provides averages for each of these segments:

                                            Average
2017 Consumer Loan Assignment Period        Consumer Loan Advance    Initial Loan Term  (in months)
January 1, 2017 through September 30, 2017  $     19,882  $   8,586  54
October 1, 2017 through December 31, 2017   21,355        9,263      56

Forecasting collection rates accurately at loan inception is difficult. With this in mind, we establish advance rates that are intended to allow us to achieve acceptable levels of profitability, even if collection rates are less than we initially forecast.

The following table presents forecasted Consumer Loan collection rates, advance rates, the spread (the forecasted collection rate less the advance rate), and the percentage of the forecasted collections that had been realized as of December 31, 2017. All amounts, unless otherwise noted, are presented as a percentage of the initial balance of the Consumer Loan (principal + interest). The table includes both dealer loans and purchased loans.

                               As of December 31, 2017
Consumer Loan Assignment Year  Forecasted    Advance % (1)  Spread %   % of Forecast
                               Collection %                            Realized (2)
2008                           70.5   %      44.6   %       25.9 %     99.8   %
2009                           79.5   %      43.9   %       35.6 %     99.8   %
2010                           77.6   %      44.7   %       32.9 %     99.5   %
2011                           74.7   %      45.5   %       29.2 %     98.9   %
2012                           73.8   %      46.3   %       27.5 %     98.2   %
2013                           73.5   %      47.6   %       25.9 %     96.0   %
2014                           71.7   %      47.7   %       24.0 %     88.9   %
2015                           65.5   %      44.5   %       21.0 %     72.7   %
2016                           64.8   %      43.8   %       21.0 %     47.5   %
2017 (3)                       65.6   %      43.2   %       22.4 %     15.3   %

(1) Represents advances paid to dealers on Consumer Loans assigned under our portfolio program and one-time payments made to dealers to purchase Consumer Loans assigned under our purchase program as a percentage of the initial balance of the Consumer Loans. Payments of dealer holdback and accelerated dealer holdback are not included.

(2) Presented as a percentage of total forecasted collections.

(3) The forecasted collection rate, advance rate and spread for 2017 Consumer Loans as of December 31, 2017 include both Consumer Loans that were in our portfolio as of September 30, 2017 and Consumer Loans assigned during the most recent quarter. The following table provides forecasted collection rates, advance rates and spreads for each of these segments:

                                            As of December 31, 2017
2017 Consumer Loan Assignment Period        Forecasted    Advance %  Spread %
                                            Collection %
January 1, 2017 through September 30, 2017  65.7   %      43.2 %     22.5 %
October 1, 2017 through December 31, 2017   65.3   %      43.4 %     21.9 %

The risk of a material change in our forecasted collection rate declines as the Consumer Loans age. For 2013 and prior Consumer Loan assignments, the risk of a material forecast variance is modest, as we have currently realized in excess of 90% of the expected collections. Conversely, the forecasted collection rates for more recent Consumer Loan assignments are less certain as a significant portion of our forecast has not been realized.

The spread between the forecasted collection rate and the advance rate has ranged from 21.0% to 35.6% over the last 10 years. The spread was at the high end of this range in 2009 and 2010, when the competitive environment was unusually favorable, and much lower during other years (2014 through 2017) when competition was more intense. The decline in the advance rate from 2016 to 2017 reflects the lower initial forecast on Consumer Loan assignments received in 2017, partially offset by an increase in purchased loans as a percentage of total unit volume. The increase in the spread from 2016 to 2017 was the result of the performance of 2017 Consumer Loans, which has materially exceeded our initial estimates, partially offset by a change in the mix of Consumer Loan assignments received during 2017, including an increase in purchased loans as a percentage of total unit volume.

The following table compares our forecast of Consumer Loan collection rates as of December 31, 2017 with the forecasts at the time of assignment, for dealer loans and purchased loans separately:

                               Dealer Loans                                              Purchased Loans
                               Forecasted Collection Percentage  as of (1)               Forecasted Collection Percentage  as of (1)
Consumer Loan Assignment Year  December 31,  Initial                          Variance   December 31,  Initial                          Variance
                               2017          Forecast                                    2017          Forecast
2008                           70.8     %    70.2     %                       0.6  %     69.8     %    68.8     %                       1.0  %
2009                           79.2     %    72.1     %                       7.1  %     80.8     %    70.5     %                       10.3 %
2010                           77.5     %    73.6     %                       3.9  %     78.7     %    73.1     %                       5.6  %
2011                           74.6     %    72.4     %                       2.2  %     76.3     %    72.7     %                       3.6  %
2012                           73.6     %    71.3     %                       2.3  %     75.9     %    71.4     %                       4.5  %
2013                           73.4     %    72.1     %                       1.3  %     74.3     %    71.6     %                       2.7  %
2014                           71.6     %    71.9     %                       -0.3 %     72.7     %    70.9     %                       1.8  %
2015                           64.8     %    67.5     %                       -2.7 %     69.8     %    68.5     %                       1.3  %
2016                           63.9     %    65.1     %                       -1.2 %     67.5     %    66.5     %                       1.0  %
2017                           65.0     %    63.8     %                       1.2  %     67.1     %    64.6     %                       2.5  %

(1) The forecasted collection rates presented for dealer loans and purchased loans reflect the Consumer Loan classification at the time of assignment. Under our portfolio program, certain events may result in dealers forfeiting their rights to dealer holdback. We transfer the dealer’s Consumer Loans from the dealer loan portfolio to the purchased loan portfolio in the period this forfeiture occurs. During the fourth quarter of 2017, we changed the presentation of current forecasted collection rates for each Consumer Loan assignment year to exclude the impact of transfers. Prior to the fourth quarter of 2017, the presentation of current forecasted collection rates for each Consumer Loan assignment year reflected the current Consumer Loan classification.

The following table presents forecasted Consumer Loan collection rates, advance rates, and the spread (the forecasted collection rate less the advance rate) as of December 31, 2017 for dealer loans and purchased loans separately. All amounts are presented as a percentage of the initial balance of the Consumer Loan (principal + interest).

                               Dealer Loans                                               Purchased Loans
Consumer Loan Assignment Year  Forecasted Collection % (1)  Advance %  (1)(2)  Spread %   Forecasted Collection % (1)  Advance %  (1)(2)  Spread %
2008                           70.8          %              43.3     %         27.5 %     69.8          %              47.1     %         22.7 %
2009                           79.2          %              43.4     %         35.8 %     80.8          %              46.0     %         34.8 %
2010                           77.5          %              44.4     %         33.1 %     78.7          %              47.3     %         31.4 %
2011                           74.6          %              45.1     %         29.5 %     76.3          %              49.3     %         27.0 %
2012                           73.6          %              46.0     %         27.6 %     75.9          %              50.0     %         25.9 %
2013                           73.4          %              47.2     %         26.2 %     74.3          %              51.5     %         22.8 %
2014                           71.6          %              47.2     %         24.4 %     72.7          %              51.8     %         20.9 %
2015                           64.8          %              43.4     %         21.4 %     69.8          %              50.2     %         19.6 %
2016                           63.9          %              42.1     %         21.8 %     67.5          %              48.6     %         18.9 %
2017                           65.0          %              42.1     %         22.9 %     67.1          %              45.8     %         21.3 %

(1) The forecasted collection rates and advance rates presented for dealer loans and purchased loans reflect the Consumer Loan classification at the time of assignment. Under our portfolio program, certain events may result in dealers forfeiting their rights to dealer holdback. We transfer the dealer’s Consumer Loans from the dealer loan portfolio to the purchased loan portfolio in the period this forfeiture occurs. During the fourth quarter of 2017, we changed the presentation of forecasted collection rates and advance rates for each Consumer Loan assignment year to exclude the impact of transfers. Prior to the fourth quarter of 2017, the presentation of forecasted collection rates and advance rates for each Consumer Loan assignment year reflected the current Consumer Loan classification.

(2) Represents advances paid to dealers on Consumer Loans assigned under our portfolio program and one-time payments made to dealers to purchase Consumer Loans assigned under our purchase program as a percentage of the initial balance of the Consumer Loans. Payments of dealer holdback and accelerated dealer holdback are not included.

During the fourth quarter of 2017, we transferred $89.0 million of dealer loans along with the related allowance for credit losses balance of $31.8 million to purchased loans. Under our portfolio program, certain events may result in dealers forfeiting their rights to dealer holdback. Substantially all of these transfers relate to dealers where events had occurred in prior periods that met our criteria for forfeiture. However, while we intended to exercise our rights to dealer holdback in the period the forfeiture event occurred, we did not exercise our rights for these dealers until the fourth quarter of 2017.

Although the advance rate on purchased loans is higher as compared to the advance rate on dealer loans, purchased loans do not require us to pay dealer holdback.

The spread on dealer loans increased from 21.8% in 2016 to 22.9% in 2017 as a result of the performance of 2017 Consumer Loans in our dealer loan portfolio, which has exceeded our initial estimates, while those assigned to us in 2016 have declined from our initial estimates, partially offset by a change in the mix of Consumer Loan assignments.

The spread on purchased loans increased from 18.9% in 2016 to 21.3% in 2017 as a result of the performance of 2017 Consumer Loans in our purchased loan portfolio, which exceeded our initial estimates by a greater margin than those assigned to us in 2016, partially offset by a change in the mix of Consumer Loan assignments.

Consumer Loan Volume

The following table summarizes changes in Consumer Loan assignment volume in each of the last eight quarters as compared to the same period in the previous year:

                    Year over Year Percent Change
Three Months Ended  Unit Volume  Dollar Volume (1)
March 31, 2016      21.1  %      18.8     %
June 30, 2016       15.1  %      27.6     %
September 30, 2016  12.0  %      33.4     %
December 31, 2016   -5.6  %      7.8      %
March 31, 2017      -6.6  %      6.4      %
June 30, 2017       1.0   %      7.1      %
September 30, 2017  -4.7  %      -0.5     %
December 31, 2017   10.8  %      26.2     %

(1) Represents advances paid to dealers on Consumer Loans assigned under our portfolio program and one-time payments made to dealers to purchase Consumer Loans assigned under our purchase program. Payments of dealer holdback and accelerated dealer holdback are not included.

Consumer Loan assignment volumes depend on a number of factors including (1) the overall demand for our financing programs, (2) the amount of capital available to fund new loans, and (3) our assessment of the volume that our infrastructure can support. Our pricing strategy is intended to maximize the amount of economic profit we generate, within the confines of capital and infrastructure constraints.

Unit and dollar volumes grew 10.8% and 26.2%, respectively, during the fourth quarter of 2017 as the number of active dealers grew 8.6% while average volume per active dealer grew 2.1%. Dollar volume grew faster than unit volume during the fourth quarter of 2017 due to an increase in the average advance paid per unit. This increase was the result of an increase in the average size of the Consumer Loans assigned primarily due to increases in the average initial loan term and average vehicle selling price and an increase in purchased loans as a percentage of total unit volume.

The following table summarizes the changes in Consumer Loan unit volume and active dealers:

                                                               For the Three Months Ended December 31,  For the Years Ended December 31,
                                                               2017     2016     % Change               2017      2016      % Change
Consumer Loan unit volume                                      77,792   70,179   10.8 %                 328,507   330,710   -0.7 %
Active dealers (1)                                             7,885    7,260    8.6  %                 11,551    10,536    9.6  %
Average volume per active dealer                               9.9      9.7      2.1  %                 28.4      31.4      -9.6 %
Consumer Loan unit volume from dealers active both periods     56,765   53,800   5.5  %                 278,497   295,444   -5.7 %
Dealers active both periods                                    4,527    4,527    --                     7,524     7,524     --
Average volume per dealer active both periods                  12.5     11.9     5.5  %                 37.0      39.3      -5.7 %
Consumer loan unit volume from dealers not active both periods 21,027   16,379   28.4 %                 50,010    35,266    41.8 %
Dealers not active both periods                                3,358    2,733    22.9 %                 4,027     3,012     33.7 %
Average volume per dealer not active both periods              6.3      6.0      5.0  %                 12.4      11.7      6.0  %

(1) Active dealers are dealers who have received funding for at least one Consumer Loan during the period.

The following table provides additional information on the changes in Consumer Loan unit volume and active dealers:

                                           For the Three Months Ended December 31,  For the Years Ended December 31,
                                           2017        2016        % Change         2017         2016         % Change
Consumer Loan unit volume from new dealers 3,947       3,277       20.4 %           46,985       46,232       1.6  %
New active dealers (1)                     919         770         19.4 %           3,740        3,406        9.8  %
Average volume per new active dealer       4.3         4.3         0.0  %           12.6         13.6         -7.4 %
Attrition (2)                              -23.3 %     -20.7 %                      -10.7  %     -8.2   %

(1) New active dealers are dealers who enrolled in our program and have received funding for their first dealer loan or purchased loan from us during the period.

(2) Attrition is measured according to the following formula: decrease in Consumer Loan unit volume from dealers who have received funding for at least one dealer loan or purchased loan during the comparable period of the prior year but did not receive funding for any dealer loans or purchased loans during the current period divided by prior year comparable period Consumer Loan unit volume.

The following table shows the percentage of Consumer Loans assigned to us as dealer loans and purchased loans for each of the last eight quarters:

                    Unit Volume                    Dollar Volume (1)
Three Months Ended  Dealer Loans  Purchased Loans  Dealer Loans  Purchased Loans
March 31, 2016      82.4   %      17.6    %        75.6   %      24.4    %
June 30, 2016       77.8   %      22.2    %        69.8   %      30.2    %
September 30, 2016  76.2   %      23.8    %        68.5   %      31.5    %
December 31, 2016   76.9   %      23.1    %        71.1   %      28.9    %
March 31, 2017      73.3   %      26.7    %        67.8   %      32.2    %
June 30, 2017       72.3   %      27.7    %        67.9   %      32.1    %
September 30, 2017  71.9   %      28.1    %        68.6   %      31.4    %
December 31, 2017   72.5   %      27.5    %        69.7   %      30.3    %

(1) Represents advances paid to dealers on Consumer Loans assigned under our portfolio program and one-time payments made to dealers to purchase Consumer Loans assigned under our purchase program. Payments of dealer holdback and accelerated dealer holdback are not included.

As of December 31, 2017 and December 31, 2016, the net dealer loans receivable balance was 68.2% and 74.6%, respectively, of the total net loans receivable balance.

Financial Results

                                             For the Three Months Ended December 31,       For the Years Ended December 31,
(Dollars in millions, except per share data) 2017             2016             % Change    2017             2016             % Change
GAAP average debt                            $   3,087.6      $   2,635.4      17.2  %     $   2,926.7      $   2,442.9      19.8 %
GAAP average shareholders’ equity            1,418.6          1,172.2          21.0  %     1,273.5          1,070.2          19.0 %
Average capital                              $   4,506.2      $   3,807.6      18.3  %     $   4,200.2      $   3,513.1      19.6 %
GAAP net income                              $   177.1        $   87.6         102.2 %     $   470.2        $   332.8        41.3 %
Diluted weighted average shares outstanding      19,471,638       20,208,838   -3.6  %         19,558,936       20,410,116   -4.2 %
GAAP net income per diluted share            $   9.10         $   4.33         110.2 %     $   24.04        $   16.31        47.4 %

The increase in GAAP net income for the three months ended December 31, 2017, as compared to the same period in 2016, was primarily the result of the following:

The increase in GAAP net income for the year ended December 31, 2017, as compared to the same period in 2016, was primarily the result of the following:

Adjusted financial results are provided to help shareholders understand our financial performance. The financial data below is non-GAAP, unless labeled otherwise. We use adjusted financial information internally to measure financial performance and to determine incentive compensation. The table below shows our results following adjustments to reflect non-GAAP accounting methods. Material adjustments are explained in the table footnotes and the subsequent "Floating Yield Adjustment" and "Senior Notes Adjustment" sections. Measures such as adjusted average capital, adjusted net income, adjusted net income per diluted share, adjusted net income plus interest expense after-tax, adjusted return on capital, adjusted revenue, operating expenses, and economic profit are all non-GAAP financial measures. These non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP.

Adjusted financial results for the three months and year ended December 31, 2017, compared to the same periods in 2016, include the following:

                                                      For the Three Months Ended December 31,            For the Years Ended December 31,
(Dollars in millions, except per share data)          2017                2016                % Change   2017                2016                % Change
Adjusted average capital                              $   4,575.8         $   3,877.4         18.0 %     $   4,276.4         $   3,572.0         19.7 %
Adjusted net income                                   $   100.5           $   96.7            3.9  %     $   399.8           $   360.6           10.9 %
Adjusted interest expense (after-tax)                 $   20.8            $   17.0            22.4 %     $   77.8            $   63.6            22.3 %
Adjusted net income plus interest expense (after-tax) $   121.3           $   113.7           6.7  %     $   477.6           $   424.2           12.6 %
Adjusted return on capital                            10.6           %    11.7           %    -9.4 %     11.2           %    11.9           %    -5.9 %
Cost of capital                                       5.2            %    5.1            %    2.0  %     5.2            %    5.0            %    4.0  %
Economic profit                                       $   61.8            $   64.3            -3.9 %     $   257.0           $   246.8           4.1  %
Diluted weighted average shares outstanding               19,471,638          20,208,838      -3.6 %         19,558,936          20,410,116      -4.2 %
Adjusted net income per diluted share                 $   5.16            $   4.79            7.7  %     $   20.44           $   17.67           15.7 %

Economic profit decreased 3.9% and increased 4.1%, respectively, for the three months and year ended December 31, 2017, as compared to the same periods in 2016. Economic profit is a function of the return on capital in excess of the cost of capital and the amount of capital invested in the business. The following table summarizes the impact each of these components had on the change in economic profit for the three months and year ended December 31, 2017, as compared to the same periods in 2016:

                                       Year over Year Change in Economic Profit
(In millions)                          For the Three Months Ended December 31, 2017  For the Year Ended   December 31, 2017
Increase in adjusted average capital   $              11.6                           $            48.7
Increase in cost of capital            (1.1                          )               (8.1                      )
Decrease in adjusted return on capital (13.0                         )               (30.4                     )
Increase (decrease) in economic profit $              (2.5           )               $            10.2

The decrease in economic profit for the three months ended December 31, 2017, as compared to the same period in 2016, was primarily the result of the following:

The increase in economic profit for the year ended December 31, 2017, as compared to the same period in 2016, was primarily the result of the following:

The following table shows adjusted revenue and operating expenses as a percentage of adjusted average capital, the adjusted return on capital, and the percentage change in adjusted average capital for each of the last eight quarters, compared to the same period in the prior year:

                                                                                             For the Three Months Ended
                                                                                             Dec. 31, 2017  Sept. 30, 2017  Jun. 30, 2017  Mar. 31, 2017  Dec. 31, 2016  Sept. 30, 2016  Jun. 30, 2016  Mar. 31, 2016
Adjusted revenue as a percentage of adjusted average capital (1)                             22.6   %       23.9    %       24.2   %       24.1   %       24.4   %       24.8    %       25.0   %       26.6   %
Operating expenses as a percentage of adjusted average capital (1)                           5.8    %       5.7     %       5.8    %       6.5    %       5.7    %       6.0     %       6.2    %       7.3    %
Adjusted return on capital (1)                                                               10.6   %       11.5    %       11.5   %       11.1   %       11.7   %       11.8    %       11.9   %       12.1   %
Percentage change in adjusted average capital compared to the same period in the prior year  18.0   %       18.5    %       18.5   %       24.5   %       28.2   %       26.1    %       27.1   %       22.7   %

(1) Annualized.

The decrease in adjusted return on capital of 90 basis points for the three months ended December 31, 2017, as compared to the three months ended September 30, 2017, was the primarily the result of a decline in the yield on our loan portfolio, which decreased the adjusted return on capital by 80 basis points, primarily due to the revision of our net cash flow timing forecast during the fourth quarter of 2017.

The following tables provide a reconciliation of non-GAAP measures to GAAP measures. All after-tax adjustments are calculated using a 37% tax rate which represents our long-term effective tax rate for 2017 and prior years. Based on currently enacted federal and state statutory income tax rates, including the enactment of the Tax Cuts and Jobs Act in December 2017, we believe our long-term effective tax rate will decrease to 23% for 2018 and future years. Certain amounts do not recalculate due to rounding.

                                                                  For the Three Months Ended
(Dollars in millions, except per share data)                      Dec. 31, 2017         Sept. 30, 2017        Jun. 30, 2017         Mar. 31, 2017         Dec. 31, 2016         Sept. 30, 2016        Jun. 30, 2016         Mar. 31, 2016
Adjusted net income
GAAP net income                                                   $    177.1            $    100.7            $    99.1             $    93.3             $    87.6             $    85.9             $    84.9             $    74.4
Floating yield adjustment (after-tax)                             23.9                  5.1                   3.1                   2.0                   8.2                   6.8                   4.8                   8.3
Senior notes adjustment (after-tax)                               (0.5            )     (0.6            )     (0.5            )     (0.5            )     (0.6            )     (0.5            )     (0.5            )     (0.5            )
Adjustment to record taxes at 37%                                 (100.0          )     0.2                   (0.1            )     (2.5            )     1.5                   0.2                   0.0                   0.1
Adjusted net income                                               $    100.5            $    105.4            $    101.6            $    92.3             $    96.7             $    92.4             $    89.2             $    82.3
Adjusted net income per diluted share (1)                         $    5.16             $    5.43             $    5.22             $    4.67             $    4.79             $    4.53             $    4.38             $    4.02
Diluted weighted average shares outstanding                            19,471,638            19,415,545            19,463,521            19,772,658            20,208,838            20,384,624            20,382,804            20,485,832
Adjusted revenue
GAAP total revenue                                                $    287.3            $    283.9            $    276.0            $    262.8            $    256.2            $    246.6            $    238.5            $    227.9
Floating yield adjustment                                         37.9                  8.0                   5.1                   3.1                   13.0                  10.9                  7.5                   13.2
Provision for credit losses                                       (61.3           )     (25.7           )     (21.8           )     (20.5           )     (27.4           )     (22.8           )     (17.9           )     (22.1           )
Provision for claims                                              (5.1            )     (5.5            )     (6.1            )     (6.0            )     (5.6            )     (6.6            )     (7.0            )     (6.8            )
Adjusted revenue                                                  $    258.8            $    260.7            $    253.2            $    239.4            $    236.2            $    228.1            $    221.1            $    212.2
Adjusted average capital
GAAP average debt                                                 $    3,087.6          $    2,979.1          $    2,907.4          $    2,732.8          $    2,635.4          $    2,496.2          $    2,445.4          $    2,194.6
GAAP average shareholders’ equity                                 1,418.6               1,299.2               1,206.6               1,169.5               1,172.2               1,121.6               1,036.1               950.9
Deferred debt issuance adjustment                                 19.3                  18.7                  17.4                  17.1                  17.4                  16.8                  16.2                  16.2
Senior notes adjustment                                           9.8                   10.4                  10.9                  11.4                  11.9                  12.4                  12.9                  13.4
Income tax adjustment (2)                                         (16.5           )     --                    --                    --                    --                    --                    --                    --
Floating yield adjustment                                         57.0                  52.3                  48.6                  48.5                  40.5                  32.6                  25.1                  20.3
Adjusted average capital                                          $    4,575.8          $    4,359.7          $    4,190.9          $    3,979.3          $    3,877.4          $    3,679.6          $    3,535.7          $    3,195.4
Adjusted revenue as a percentage of adjusted average capital (3)  22.6            %     23.9            %     24.2            %     24.1            %     24.4            %     24.8            %     25.0            %     26.6            %
Adjusted interest expense (after-tax)
GAAP interest expense                                             $    32.2             $    30.5             $    29.9             $    27.6             $    26.2             $    25.1             $    24.3             $    22.1
Senior notes adjustment                                           0.9                   0.8                   0.8                   0.8                   0.9                   0.8                   0.8                   0.8
Adjusted interest expense (pre-tax)                               33.1                  31.3                  30.7                  28.4                  27.1                  25.9                  25.1                  22.9
Adjustment to record tax effect at 37%                            (12.3           )     (11.5           )     (11.4           )     (10.5           )     (10.1           )     (9.5            )     (9.4            )     (8.4            )
Adjusted interest expense (after-tax)                             $    20.8             $    19.8             $    19.3             $    17.9             $    17.0             $    16.4             $    15.7             $    14.5

(1) Net income per share is computed independently for each of the quarters presented. Therefore, the sum of quarterly net income per share information may not equal year-to-date net income per share.

(2) The enactment of the Tax Cuts and Jobs Act in December 2017 resulted in the reversal of $99.8 million of provision for income taxes in the fourth quarter of 2017. While the new federal statutory rate was not effective until January 1, 2018, we were required to revalue deferred taxes and uncertain tax positions as of December 31, 2017 at the new federal statutory rate. This adjustment removes the impact of this reversal from GAAP average shareholders’ equity. We believe the income tax adjustment provides a more accurate reflection of the performance of our business as we are recognizing provision for income taxes at the applicable long-term effective tax rate for the period.

(3) Annualized.

                                                                                             For the Three Months Ended
(Dollars in millions)                                                                        Dec. 31, 2017      Sept. 30, 2017     Jun. 30, 2017      Mar. 31, 2017      Dec. 31, 2016      Sept. 30, 2016     Jun. 30, 2016      Mar. 31, 2016
Adjusted return on capital
Adjusted net income                                                                          $    100.5         $    105.4         $    101.6         $    92.3          $    96.7          $    92.4          $    89.2          $    82.3
Adjusted interest expense (after-tax)                                                        20.8               19.8               19.3               17.9               17.0               16.4               15.7               14.5
Adjusted net income plus interest expense (after-tax)                                        $    121.3         $    125.2         $    120.9         $    110.2         $    113.7         $    108.8         $    104.9         $    96.8
Reconciliation of GAAP return on equity to adjusted return on capital (4)
GAAP return on equity (1)                                                                    49.9         %     31.0         %     32.9         %     31.9         %     29.9         %     30.6         %     32.8         %     31.3         %
Non-GAAP adjustments                                                                         -39.3        %     -19.5        %     -21.4        %     -20.8        %     -18.2        %     -18.8        %     -20.9        %     -19.2        %
Adjusted return on capital (2)                                                               10.6         %     11.5         %     11.5         %     11.1         %     11.7         %     11.8         %     11.9         %     12.1         %
Economic profit
Adjusted return on capital                                                                   10.6         %     11.5         %     11.5         %     11.1         %     11.7         %     11.8         %     11.9         %     12.1         %
Cost of capital (3) (4)                                                                      5.2          %     5.1          %     5.1          %     5.2          %     5.1          %     4.8          %     4.9          %     5.0          %
Adjusted return on capital in excess of cost of capital                                      5.4          %     6.4          %     6.4          %     5.9          %     6.6          %     7.0          %     7.0          %     7.1          %
Adjusted average capital                                                                     $    4,575.8       $    4,359.7       $    4,190.9       $    3,979.3       $    3,877.4       $    3,679.6       $    3,535.7       $    3,195.4
Economic profit                                                                              $    61.8          $    69.4          $    67.3          $    58.5          $    64.3          $    64.5          $    61.4          $    56.6
Reconciliation of GAAP net income
to economic profit
GAAP net income                                                                              $    177.1         $    100.7         $    99.1          $    93.3          $    87.6          $    85.9          $    84.9          $    74.4
Non-GAAP adjustments                                                                         (76.6        )     4.7                2.5                (1.0         )     9.1                6.5                4.3                7.9
Adjusted net income                                                                          100.5              105.4              101.6              92.3               96.7               92.4               89.2               82.3
Adjusted interest expense (after-tax)                                                        20.8               19.8               19.3               17.9               17.0               16.4               15.7               14.5
Adjusted net income plus interest expense (after-tax)                                        121.3              125.2              120.9              110.2              113.7              108.8              104.9              96.8
Less: cost of capital                                                                        59.5               55.8               53.6               51.7               49.4               44.3               43.5               40.2
Economic profit                                                                              $    61.8          $    69.4          $    67.3          $    58.5          $    64.3          $    64.5          $    61.4          $    56.6
Operating expenses
GAAP salaries and wages                                                                      $    38.2          $    33.7          $    32.7          $    35.5          $    31.3          $    32.4          $    30.1          $    32.7
GAAP general and administrative                                                              13.4               14.2               14.0               13.9               12.5               11.0               12.6               12.1
GAAP sales and marketing                                                                     14.7               14.2               14.4               15.1               11.6               12.2               11.9               13.7
Operating expenses                                                                           $    66.3          $    62.1          $    61.1          $    64.5          $    55.4          $    55.6          $    54.6          $    58.5
Operating expenses as a percentage of adjusted average capital (4)                           5.8          %     5.7          %     5.8          %     6.5          %     5.7          %     6.0          %     6.2          %     7.3          %
Percentage change in adjusted average capital compared to the same period in the prior year  18.0         %     18.5         %     18.5         %     24.5         %     28.2         %     26.1         %     27.1         %     22.7         %

(1) Calculated by dividing GAAP net income by GAAP average shareholders’ equity.

(2) Adjusted return on capital is defined as adjusted net income plus adjusted interest expense (after-tax) divided by adjusted average capital.

(3) The cost of capital includes both a cost of equity and a cost of debt. The cost of equity capital is determined based on a formula that considers the risk of the business and the risk associated with our use of debt. The formula utilized for determining the cost of equity capital is as follows: (the average 30-year Treasury rate + 5%) + [(1 - tax rate) x (the average 30-year Treasury rate + 5% - pre-tax average cost of debt rate) x average debt/(average equity + average debt x tax rate)]. For the periods presented, the average 30-year Treasury rate and the adjusted pre-tax average cost of debt were as follows:

                                           For the Three Months Ended
                                           Dec. 31, 2017  Sept. 30, 2017  Jun. 30, 2017  Mar. 31, 2017  Dec. 31, 2016  Sept. 30, 2016  Jun. 30, 2016  Mar. 31, 2016
Average 30-year Treasury rate              2.8    %       2.8     %       2.9    %       3.0    %       2.8    %       2.2     %       2.6    %       2.7    %
Adjusted pre-tax average cost of debt (4)  4.3    %       4.2     %       4.2    %       4.1    %       4.1    %       4.1     %       4.1    %       4.0    %

(4) Annualized.

                                                                       For the Years Ended December 31,
(In millions, except share and per share data)                         2017                  2016
Adjusted net income
GAAP net income                                                        $    470.2            $    332.8
Floating yield adjustment (after-tax)                                  34.1                  28.1
Senior notes adjustment (after-tax)                                    (2.1            )     (2.1            )
Adjustment to record taxes at 37%                                      (102.4          )     1.8
Adjusted net income                                                    $    399.8            $    360.6
Adjusted net income per diluted share                                  $    20.44            $    17.67
Diluted weighted average shares outstanding                                 19,558,936            20,410,116
Adjusted average capital
GAAP average debt                                                      $    2,926.7          $    2,442.9
GAAP average shareholders’ equity                                      1,273.5               1,070.2
Deferred debt issuance adjustment                                      18.1                  16.6
Senior notes adjustment                                                10.6                  12.7
Income tax adjustment (1)                                              (4.1            )     --
Floating yield adjustment                                              51.6                  29.6
Adjusted average capital                                               $    4,276.4          $    3,572.0
Adjusted interest expense (after-tax)
GAAP interest expense                                                  $    120.2            $    97.7
Senior notes adjustment                                                3.3                   3.3
Adjusted interest expense (pre-tax)                                    123.5                 101.0
Adjustment to record tax effect at 37%                                 (45.7           )     (37.4           )
Adjusted interest expense (after-tax)                                  $    77.8             $    63.6
Adjusted return on capital
Adjusted net income                                                    $    399.8            $    360.6
Adjusted interest expense (after-tax)                                  77.8                  63.6
Adjusted net income plus interest expense (after-tax)                  $    477.6            $    424.2
Reconciliation of GAAP return on equity to adjusted return on capital
GAAP return on equity (2)                                              36.9            %     31.1            %
Non-GAAP adjustments                                                   -25.7           %     -19.2           %
Adjusted return on capital (3)                                         11.2            %     11.9            %
Economic profit
Adjusted return on capital                                             11.2            %     11.9            %
Cost of capital (4)                                                    5.2             %     5.0             %
Adjusted return on capital in excess of cost of capital                6.0             %     6.9             %
Adjusted average capital                                               $    4,276.4          $    3,572.0
Economic profit                                                        $    257.0            $    246.8
Reconciliation of GAAP net income to economic profit
GAAP net income                                                        $    470.2            $    332.8
Non-GAAP adjustments                                                   (70.4           )     27.8
Adjusted net income                                                    399.8                 360.6
Adjusted interest expense (after-tax)                                  77.8                  63.6
Adjusted net income plus interest expense (after-tax)                  477.6                 424.2
Less: cost of capital                                                  220.6                 177.4
Economic profit                                                        $    257.0            $    246.8
Operating expenses
GAAP salaries and wages                                                $    140.1            $    126.5
GAAP general and administrative                                        55.5                  48.2
GAAP sales and marketing                                               58.4                  49.4
Operating expenses                                                     $    254.0            $    224.1

(1) The enactment of the Tax Cuts and Jobs Act in December 2017 resulted in the reversal of $99.8 million of provision for income taxes in the fourth quarter of 2017. While the new federal statutory rate was not effective until January 1, 2018, we were required to revalue deferred taxes and uncertain tax positions as of December 31, 2017 at the new federal statutory rate. This adjustment removes the impact of this reversal from GAAP average shareholders’ equity. We believe the income tax adjustment provides a more accurate reflection of the performance of our business as we are recognizing provision for income taxes at the applicable long-term effective tax rate for the period.

(2) Calculated by dividing GAAP net income by GAAP average shareholders’ equity.

(3) Adjusted return on capital is defined as adjusted net income plus adjusted interest expense after-tax divided by adjusted average capital.

(4) The cost of capital includes both a cost of equity and a cost of debt. The cost of equity capital is determined based on a formula that considers the risk of the business and the risk associated with our use of debt. The formula utilized for determining the cost of equity capital is as follows: (the average 30-year Treasury rate + 5%) + [(1 - tax rate) x (the average 30-year Treasury rate + 5% - pre-tax average cost of debt rate) x average debt/(average equity + average debt x tax rate)]. For the periods presented, the average 30-year Treasury rate and the adjusted pre-tax average cost of debt were as follows:

                                       For the Years Ended December 31,
                                       2017      2016
Average 30-year Treasury rate          2.9    %  2.6    %
Adjusted pre-tax average cost of debt  4.2    %  4.1    %

Floating Yield Adjustment

The purpose of this non-GAAP adjustment is to modify the calculation of our GAAP-based finance charge revenue so that favorable and unfavorable changes in expected cash flows from loans receivable are treated consistently. To make the adjustment understandable, we must first explain how GAAP requires us to account for finance charge revenue, our primary revenue source.

The finance charge revenue we will recognize over the life of the loan equals the cash inflows from our loan portfolio less cash outflows to acquire the loans. Our GAAP finance charge revenue is based on estimates of future cash flows and is recognized on a level-yield basis over the estimated life of the loan. With the level-yield approach, the amount of finance charge revenue recognized from a loan in a given period, divided by the loan asset, is a constant percentage. Under GAAP, favorable changes in expected cash flows are treated as increases to the yield and are recognized over time, while unfavorable changes are recorded as a current period expense. The non-GAAP methodology that we use (the "floating yield" method) is identical to the GAAP approach except that, under the "floating yield" method, all changes in expected cash flows (both positive and negative) are treated as yield adjustments and therefore impact earnings over time. The GAAP treatment results in a lower carrying value of the loan receivable asset, but may result in either higher or lower earnings for any given period depending on the timing and amount of expected cash flow changes.

We believe the floating yield adjustment provides a more accurate reflection of the performance of our business, since both favorable and unfavorable changes in estimated cash flows are treated consistently.

Senior Notes Adjustment

On January 22, 2014, we issued $300.0 million of 6.125% senior notes due 2021 (the "2021 notes") in a private offering exempt from registration under the Securities Act of 1933. On February 21, 2014, we used the net proceeds from the 2021 notes, together with borrowings under our revolving credit facilities, to redeem in full the $350.0 million outstanding principal amount of our 9.125% senior notes due 2017 (the "2017 notes"). The purpose of this non-GAAP adjustment is to modify our GAAP financial results to treat the issuance of the 2021 notes as a refinancing of the 2017 notes.

Under GAAP, the redemption of the 2017 notes in the first quarter of 2014 required us to recognize a pre-tax loss on extinguishment of debt of $21.8 million. Under our non-GAAP approach, the loss on extinguishment of debt and additional interest expense that was recognized for GAAP purposes for the quarter ended March 31, 2014 was deferred as a debt issuance cost and is being recognized ratably as interest expense over the term of the 2021 notes. In addition, for adjusted average capital purposes, the impact of additional outstanding debt related to the one month lag from the issuance of the 2021 notes to the redemption of the 2017 notes was deferred and is being recognized ratably over the term of the 2021 notes.

We believe the senior notes adjustment provides a more accurate reflection of the performance of our business, since we are recognizing the costs incurred with this transaction in a manner consistent with how we recognize the costs incurred when we periodically refinance our other debt facilities.

Cautionary Statement Regarding Forward-Looking Information

We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all of our forward-looking statements. Statements in this release that are not historical facts, such as those using terms like "may," "will," "should," "believe," "expect," "anticipate," "assume," "forecast," "estimate," "intend," "plan," "target" and those regarding our future results, 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. Actual results could differ materially from these forward-looking statements since the statements are based on our current expectations, which are subject to risks and uncertainties. Factors that might cause such a difference include, but are not limited to, the factors set forth in Item 1A of our Form 10-K for the year ended December 31, 2016, filed with the Securities and Exchange Commission on February 10, 2017, other risk factors discussed herein or listed from time to time in our reports filed with the Securities and Exchange Commission and the following:

Other factors not currently anticipated by management may also materially and adversely affect our business, financial condition and results of operations. We do not undertake, and expressly disclaim any obligation, to update or alter our statements whether as a result of new information, future events or otherwise, except as required by applicable law.

Description of Credit Acceptance Corporation

Since 1972, Credit Acceptance has offered financing programs that enable automobile dealers to sell vehicles to consumers, regardless of their credit history. Our financing programs are offered through a nationwide network of automobile dealers who benefit from sales of vehicles to consumers who otherwise could not obtain financing; from repeat and referral sales generated by these same customers; and from sales to customers responding to advertisements for our financing programs, but who actually end up qualifying for traditional financing.

Without our financing programs, consumers are often unable to purchase vehicles or they purchase unreliable ones. Further, as we report to the three national credit reporting agencies, an important ancillary benefit of our programs is that we provide consumers with an opportunity to improve their lives by improving their credit score and move on to more traditional sources of financing. Credit Acceptance is publicly traded on the NASDAQ under the symbol CACC. For more information, visit creditacceptance.com.

CREDIT ACCEPTANCE CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(Dollars in millions, except per share data) For the Three Months Ended December 31,  For the Years Ended December 31,
                                             2017           2016                      2017            2016
Revenue:
Finance charges                              $     262.3    $     232.4               $     1,011.5   $     874.3
Premiums earned                              10.2           10.6                      41.1            43.0
Other income                                 14.8           13.2                      57.4            51.9
Total revenue                                287.3          256.2                     1,110.0         969.2
Costs and expenses:
Salaries and wages                           38.2           31.3                      140.1           126.5
General and administrative                   13.4           12.5                      55.5            48.2
Sales and marketing                          14.7           11.6                      58.4            49.4
Provision for credit losses                  61.3           27.4                      129.3           90.2
Interest                                     32.2           26.2                      120.2           97.7
Provision for claims                         5.1            5.6                       22.7            26.0
Total costs and expenses                     164.9          114.6                     526.2           438.0
Income before provision for income taxes     122.4          141.6                     583.8           531.2
Provision for income taxes                   (54.7       )  54.0                      113.6           198.4
Net income                                   $     177.1    $     87.6                $     470.2     $     332.8
Net income per share:
Basic                                        $     9.13     $     4.35                $     24.12     $     16.37
Diluted                                      $     9.10     $     4.33                $     24.04     $     16.31
Weighted average shares outstanding:
Basic                                        19,407,344     20,134,406                19,497,719      20,331,769
Diluted                                      19,471,638     20,208,838                19,558,936      20,410,116

CREDIT ACCEPTANCE CORPORATION

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(Dollars in millions, except per share data)                                                                                                                                     As of
                                                                                                                                                                                 December 31, 2017  December 31, 2016
ASSETS:
Cash and cash equivalents                                                                                                                                                        $     8.2          $     14.6
Restricted cash and cash equivalents                                                                                                                                             255.6              224.7
Restricted securities available for sale                                                                                                                                         46.1               45.3
Loans receivable (including $1.4 from affiliates as of December 31, 2016)                                                                                                        5,049.0            4,207.0
Allowance for credit losses                                                                                                                                                      (429.4        )    (320.4        )
Loans receivable, net                                                                                                                                                            4,619.6            3,886.6
Property and equipment, net                                                                                                                                                      20.5               18.2
Income taxes receivable                                                                                                                                                          2.2                2.3
Other assets                                                                                                                                                                     33.4               26.3
Total Assets                                                                                                                                                                     $     4,985.6      $     4,218.0
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Liabilities:
Accounts payable and accrued liabilities                                                                                                                                         $     151.7        $     143.9
Revolving secured line of credit                                                                                                                                                 13.9               --
Secured financing                                                                                                                                                                2,514.1            2,062.4
Senior notes                                                                                                                                                                     542.8              541.3
Deferred income taxes, net                                                                                                                                                       187.4              273.1
Income taxes payable                                                                                                                                                             39.9               23.6
Total Liabilities                                                                                                                                                                3,449.8            3,044.3
Shareholders’ Equity:
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued                                                                                                       --                 --
Common stock, $0.01 par value, 80,000,000 shares authorized, 19,310,049 and 19,877,381 shares issued and outstanding as of December 31, 2017 and December 31, 2016, respectively 0.2                0.2
Paid-in capital                                                                                                                                                                  145.5              131.7
Retained earnings                                                                                                                                                                1,390.3            1,042.0
Accumulated other comprehensive loss                                                                                                                                             (0.2          )    (0.2          )
Total Shareholders’ Equity                                                                                                                                                       1,535.8            1,173.7
Total Liabilities and Shareholders’ Equity                                                                                                                                       $     4,985.6      $     4,218.0
Investor Relations: Douglas W. Busk
Senior Vice President and Treasurer
(248) 353-2700 Ext. 4432
IR@creditacceptance.com

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