Good day, everyone, and welcome to the Credit Acceptance Corporation Fourth Quarter 2014 Earnings Call. Today’s call is being recorded. A webcast and transcript of today’s earnings call will be made available on Credit Acceptance webcast. At this time, I’d now to like the turn the call over to Credit Acceptance’s Senior Vice President and Treasurer, Doug Busk.

Thank you, Amanda. Good afternoon and welcome to the Credit Acceptance Corporation fourth quarter 2014 earnings call. As you read our news release posted on the Investor Relations section of our website at creditacceptance.com, and as you listen to this conference call, please recognize that both contain forward-looking statements within the meaning of Federal Securities law. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such statements. These risks and uncertainties include those spelled out in the cautionary statement regarding forward-looking information included in the news release. Consider all forward-looking statements in light of those and other risks and uncertainties. Additionally, I should mention that to comply with the SEC's Regulation G, please refer to the adjusted financial results section of our news release, which provides tables showing how non-GAAP measures reconcile to GAAP measures. At this time, Brett Roberts, our Chief Executive Officer; Ken Booth, our Chief Financial Officer, and I will take your questions.

Thank you. [Operator Instructions] Our first question comes from Vincent Caintic with Macquarie. Your line is open.

Hi, thanks guys and good evening. I wanted to touch on the comment in the press release about higher volumes due to lowering competition, just want to get a sense of what had changed, what you are seeing in the industry and if this is something that just for this quarter or something that you think might be evolving over the next year? Thanks.

So we concluded that the competitive environment was more favorable in the quarter mostly based on the volume per dealer which as you know have run a negative year-over-year trend and turn positive this quarter. So that’s the best in side, we have in the market is the volume per number. And our sale was up roughly 5% for the quarter, nice growth in active dealers of 14.5% got us to the 19% number for the quarter.

Got it, okay. Could you maybe another way, what have you been seeing this quarter in terms of those number, I mean just trying to get a sense of this is - if this was a continuing trend?

I think it’s hard to say if it’s a continuing trend, I mean it is a nice data point, it was a good quarter from a volume perspective but I think it’s too early to conclude whether just an averaging or whether it’s something that will continue in the future.

We don’t have - obviously January has not done, we took - we don’t talk about the month subsequent to the quarter until it’s completed but if you want send an investor question, we’ll talk about January up to the months.

Got it, okay. And then just a quick one on the refinancing, just wanted to get a sense, you had a nice refinancing this part quarter and just wanted to get a sense of what the environment looks like for asset-backed and also your senior notes? Thanks.

When you say refinancing, are you referring to the securitization with the press today?

Yeah.

You know I would say that the ABS market continues to be receptive. You know relative to middle of last year, the deals were taking a little bit longer to come together and you’re seeing what were our subscription levels in general. But I would say the market continues to be receptive though probably a bit more challenging that we saw earlier in 2014.

Okay, great. Thanks very much guys.

Our next question comes from John Rowan with Sidoti and Company. Your line is open.

Good afternoon, guys.

Hi.

The 2.2 million that you noted as a gain from changing your forecasting methodology, was that - is that why the provision expense showed a credit?

Correct.

Okay and what exactly are maybe you can give us some colors to what you changed, it didn’t seem like you changed, it was more function of timing where did you push out the timing or put forward the timing of forecasted collections?

You know we forecast both the amount and the timing of collection and as well as dealer holdback payments and then we compare obviously we evaluated the actually results against those forecast every month. When we start to see a variance, we go through a process where redeveloped the forecasting model and give it to that variance. So there is a routine maintenance if you will that are forecasting methodology that occur some time to time.

And how often would you say that you do this type of maintenance to the model?

Well we look at it every month and if the variances start to become a trend or get large enough then we redo the model.

Which advantages in particular where you seeing better results versus your forecasts?

Well again it was the timing more than the amount. It wasn’t the amount at all; it was strictly a function of the timing. I think when if that probably reflect, when the environment gets more competitive, we typically have greater frequency of prepayments because our customers are getting refinanced by others and so that accelerates the cash flows on the collections as well as on the holdback payment. So when we see that for a period of time, then we reevaluate the model. I expect that if we enter a period where it’s less competitive, we’ll see a change in the asset direction.

Okay and then shifting gears a little bit. Why did you increase the term in the fourth quarter?

The term in the fourth quarter is just the function of our policy, so we got more generous in the term policy, that’s something that really continues a trend that started. When I joined the company back in 1991, we did a 24 month term was the max term that we would do and we gradually setup over the last 25 years and so now do a longer term. In the fourth quarter, we rolled out a policy which we had experimented with which resulted in longer terms.

Yeah, was that - I mean longer terms in this space have been over the last couple of year type of - you know greater competition, so I am curious how that fetch your comments about competition easing a little bit and why you go ahead and increase the term, which presumably increases your risk?

I think we started the terms increase in August, so obviously we didn’t have the benefit of seeing the fourth quarter results when at that time. But it’s - I think you are right. We probably wouldn’t lengthen the terms if we’re growing 20% or 30% in competition was light, it’s something that you do and the environment is difficult and so we did it, it’s calculated and something we’ve done many times before and look on for the weaken prices.

Right and then would you willing to give us an update as to where the advance rates and forecasted collection are currently trending for whatever is generating thus far in 2015?

We don’t have any data on 2015 at this point.

Okay and then lastly, any updates on the any of the regulatory issues the company - the AG of Massachusetts, any updates?

No updates on any of those. We responded to the request that we got and we haven’t heard anything in addition.

Okay, thank you very much.

Our next question comes from John Hecht with Jefferies. Your line is open.

Thanks very much. Both questions related to you kind of modeling if you will is that - you had an uptick in salaries and wages in the fourth quarter relative to kind of run rate to the first part of the year, is that just seasonal change or is that a new run rate go forward due to hires?

Well, we had about a $6 million increase you know versus Q3 and bout 3.8million of that was an increase in stock compensation expense which is just a change in investing assumption. As we talked last quarter that number tends to be relatively volatile to be anywhere between $1.5-$2 million up to $5 million so on a quarterly basis. So over half of the variant versus you know prior quarters is probably you know due to just changes in levels of stock compensation. Those another 1.5 million versus the third quarter that was resulted increase bonus expense due to improvement in various performance majors and then we had roughly another $1 million increase in salaries and wages, some other support function, some other origination and servicing. So the last category you know would be the one that would tend to be more sticky the stock comp is going to vary from quarter to quarter as well the bonus expense.

Okay, that’s great, thanks. And that second question is more just interested in your commentary. You increase the 2013 vintage collections forecasts in the quarter and then you had a small decrease in 2011, 2012 and then an increase in all the other vintages. In that sort of just the opposite what we’re seeing in terms of you know cumulative loss assumptions and then ABS market were indirect - you think you know probably outperformance you know ’11 and ’12 and underperformance in 2013 in terms of credit. Do you - is this just where you are coming from or is there different mix of assets growth in the you and the market or how should one just think about those changes relative to what we’re seeing elsewhere?

I the first - the first number I focus on that table is the variants on the initial forecast. So over the last ten years, we’ve have variants in every year, seven of those were positive variants and three of those with the other way - the three that went the other way were primarily as a result of the financial crisis and give this severity of that crisis, the magnitude of those was very low. The biggest mess was in 2009 and we’re happy that those are positive mess. And then the last three or four years, the number have been relative modest. So we’re running, if you want a look for a trend there, I would say we’re running modest positive variants in all recent entities which the only surprising thing there is when the competitive environment gets more difficult, typically that puts pressure on own performance. We really haven’t that in recent vintages, so it’s a little bit of a positive surprise there, but other than that I don’t think there is anything remarkable in the long performance during the quarter.

Okay.

You look at the comparison, you look at the change in the variants from the third quarter you know really there wasn’t anything for ‘9, ’10, ’11, ’12. ’13 got a little bit better. So our expectation remain pretty consistent during the fourth quarter.

Okay and then…

But the other thing I might point out there is just we have to - when you look at that table, you need to have a scale in mind, so what constitutes the big numbers, what constitutes the small number. We all think that 100 basis point variants in the collection rate impacts our after tax return by about 40 basis points. So if we you look at a 10 basis point change or a 20 basis point change is really not a significant change.

Yeah, okay, thanks. And then the last question, I am wondering if you could just talk about you know your desire to do more buybacks or tenders this year, so any commentary around that?

You know we continue to think of buybacks in same way we have in the past. Our preferences to invest all are available capital. And the business historically periodically we found ourselves in an excess capital position. And when we find ourselves in that position if we can buy the stock back and less in intrinsic value we do so. Obviously there is an inverse correlation between the rate and the amount of stock that you can buyback. So if we grow more rapidly as we did in Q4, all things equal, we’re going to buyback less stock and vice versa. But we continue to approach at the same way.

Okay, great, I appreciate that, guys, thanks.

Our next question comes from Robert Dodd with Raymond James. Your line is open.

Excuse me. Hi guys. I am just driven back the kind of the forecast collections versus advance rate. If I look at the delta and obviously you talked before but haven’t generally changed pricing though changing term is - when I look at the advance rate for 2014 versus where it was at the end of third quarter versus compressed 40 points, now that the event obviously the - and official the forecast collection has compressed 30, so net you were ahead. But could you give us any color on what with an improving competitive environment that you talked about. What driving that forecast collection for your 2014 Dealer Loans, I mean 30 basis points isn’t much but it’s a change. Is there anything particularly see metrics there?

We tried to address that in the release, all we said that the lower collection rate Q4 originations was a result of a change in mix and the lengthening term.

Okay, and on that term question, when I look at the average the price of the vehicle and it looks like that’s up when I had a vision it get up about 5% year-over-year and looks like an all time. I mean is that simply correlated to extending the term, resulting in obviously consumers and potential customers being able to buy a slightly more pricy vehicle with the same payment or is that a mix of dealer issue?

Now it’s same as the former.

Okay, got it. I appreciate it, thanks a lot guys.

Our next question comes from [indiscernible]. Your line is open.

Hi Brett, hi Ken, hi Doug congratulations on a great year. I just wanted to ask you, you made the comment about competition, the competitive environment improving, we always expected there are certain point you know that would happen. I just wanted to just get a little more color from you just in terms of what you are seeing, are you seeing - is it the regulatory environment which is cause capital pullback, is it people worsening loan performance, I know we’ve see delinquencies go up. What do you think has been driving this reduction in competitive and competition you see?

I think what we are seeing is the volume per dealer went up for the quarter which is a change in trend line. Perhaps in any other explanation we attribute that to a change in the competitive environment, but if you think about the magnitude and the change you are talking about, they have loan for dealer for the quarter. You just don’t - you don’t have a lot of visibility into that. The average sales were up out in the field, can’t really detect that, even a dealer can’t really tally this, given you a half in three month periods. So you don’t get a lot of anecdotal evidence to support your pieces that got easier, it’s really just a function of looking at the result and saying likely the competitive environment got more favorable during the quarter.

Yeah, okay, alright, thank you very much.

[Operator Instructions] Our next question comes from Lucy Webster with Compass Point. Your line is open.

Hi, thanks for taking my questions. It looks like Purchased Loan freeze over 80% on a year-over-year basis, what’s driving that growth, is it pricing reductions or is there a change in program?

I think its two things, one as we said last quarter, we have got more aggressive on the pricing and the Purchased Loan product, I think that’s one component. And I think we’re increasing doing as it’s a different channel, so realize that there are dealers that are attracted to our traditional program, our portfolio program and so we’re using the purchased program as a way to handle those dealers. The purchased program was about 9.5% of originations and third quarter is about 11% of originations in the fourth quarter. So it’s continued the trend that we saw over 2014 of entering as a percentage of the business.

Would you expect that mix to stabilize?

I think it’s hard to say, I mean that number has been as low as 3% or 4%, I think it’s been as high as 30%, so it’s probably gets difficult to say.

Okay and then the $2.2 million benefit from change in the forecasting methodology, there was a non-cash benefit, right?

It’s timing of cash flow, so it’s - I mean there was an economic benefit to receiving cash flows quicker but in terms of the overall amount of cash flows that forecast hasn’t changed.

Okay and then can you provide any inside into dealer, the dealer growth outlook for 2015. I know that as you mentioned on the last call that it was going to around 10% for 2014 and so just looking for where it is, that going to continue on the current trend or is it kind of stabilize given the volume for decline has not stabilized?

We don’t have forecast for that number for next year, I mean we have a great product and we think there is lot of dealers that will benefit from a product that don’t it currently, so we are looking to grow the dealer base overtime but how quickly we do that I think it’s tough to predict.

Okay, thanks. Thanks for taking my questions.

Our next question comes from John Rowan with Sidoti and Company. Your line is open.

Hi guys. So I just had a quick follow-up. Thinking back to your accounting, that you point 2 million credit that went through the provision expense. If taking that how to be a prior vintage that you impaired and now reversed and are moving back up to the original assumption. Am I correct in that it’s natural - the way the accounting works that must have been by definition of previous impaired loan?

I think that’s right. I try to avoid thinking about the provision and the GAAP accounting treatment as much as I can but if you force me to, I think what you are saying is correct.

Okay, thank you.

Thank you. Our next question comes from Daniel Smith with Peyton Capital. Your line is open.

Hi guys. From an accounting standpoint, I thought previously you know like positive changes in forecasted collections were amortized. And then this one, I know it’s a little different because it’s changing methodology but - so why is this different and then you recognize it all at ones versus amortizing over the remaining life?

I think that the prior question answered that one. I mean if you can reverse a provision but you’re going to be in a situation where your yield is now expected to be greater than it was at origination then you take that amount into your financial results perspective.

Yeah, so for the previous question, you said it was previously impaired loan that because unimpaired and you agreed with that?

That’s correct, yeah.

Okay, so there when you unimpaired a loan then you recognize it all the ones?

Correct, you can reverse impairment in the current period but if you end up adjusting your yield on the dealer load to an amount great than what you expected at origination that would be recognized perceptively.

So can you help me understand the difference between, so the yield is a function of the dollars you expect to collect versus what you paid for the pool, but so how is an impairment different versus you know at forecasted collection dollars?

Well, I mean can occur due to a negative variants and collections versus expected or different timing then it’s expected. So you can have impairment occur as a result of either of those two things.

Okay, so this 2.2 million previous quarter would have been a negative variants where you recognized all at ones?

I mean it could have been all at ones or it could have been accumulated over a multiple months or quarter, but yes it would have been assets that they yield was expected to be less than it was origination. As a result, we recorded a provision and established in allowance.

Okay, so it really is no different. I think that make sense. Thank you.

There is no further question in queue. I would like to turn the conference back over to Mr. Busk for any additional or closing remarks.

We’d like to thank everyone for their support and for joining us on our conference call today. If you have any additional follow-up questions, please direct them to the Investor Relations mailbox at ir@creditacceptance.com. We look forward to talking to you again next quarter. Thank you.