Executives
Douglas W. Busk - Senior Vice President and Treasurer
Brett A. Roberts - Chief Executive Officer and Executive Director
Kenneth S. Booth - Chief Financial Officer and Chief Accounting Officer
Analysts
Kyle M. Joseph - Stephens Inc., Research Division
Kenneth Bruce - BofA Merrill Lynch, Research Division
John M. Hopkins - Chartwell Investment Partners
Robert J. Dodd - Raymond James & Associates, Inc., Research Division
David L. Henle
Moshe Orenbuch - Crédit Suisse AG, Research Division
Credit Acceptance (CACC) Q4 2013 Earnings Call January 30, 2014 5:00 PM ET
Operator
Good day, everyone, and welcome to the Credit Acceptance Corp. Fourth Quarter 2013 Earnings Call. Today's call is being recorded. A webcast and transcript of today's call will be made available on Credit Acceptance's website. At this time, I'd like to turn the call over to Credit Acceptance Senior Vice President and Treasurer, Doug Busk. Sir, please go ahead.
Douglas W. Busk
Thank you, Huey. Good afternoon, and welcome to the Credit Acceptance Corp's. fourth quarter 2013 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 laws. 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 estimates.
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.
Question-and-Answer Session
Operator
[Operator Instructions] And it looks like our first question will come from the line of Kyle Joseph with Stephens.
Kyle M. Joseph - Stephens Inc., Research Division
In terms of the dealership expansion, are you guys expanding to new geographies or going to dealerships in existing geographies?
Brett A. Roberts
We're currently in every state. So we're just expanding in the states that we're already in.
Kyle M. Joseph - Stephens Inc., Research Division
Okay. And then a modeling question, on the refi you guys did good this quarter -- or sorry, in January, can you tell us what you expect that to do to your weighted average cost of funds?
Kenneth S. Booth
Yes, we expected the -- after you get through the period where we have both sets of notes outstanding, it should reduce our effective interest rate by slightly less than a point. And again, that's given the current mix of debt that we have today.
Kyle M. Joseph - Stephens Inc., Research Division
Great. And then can you guys talk a little bit about competition and trends you're seeing there, whether it's increasing, decreasing or been somewhat stable? Because I mean, we saw good growth from you guys, but we also saw a little uptick in the advance rates and whatnot. So just what's going on there?
Brett A. Roberts
Again, the best sense we have for the competitive environment is just looking at the volume numbers. So as you mentioned, the overall unit growth was the best it's been in quite a while. But that was due to the expansion of the dealer base volume per dealer did decline again. So with current revenue yields at really the low point of the last 10-or-so years and volume per dealer also at the low point would still assess as a very competitive environment.
Kyle M. Joseph - Stephens Inc., Research Division
All right. And then credit was very good in the quarter. Can you tell us, are you doing anything differently there or -- because over -- for other companies we've covered, we've seen a little bit of a reversion as a mean with credit, but you guys seem to still be improving.
Brett A. Roberts
We haven't changed anything there.
Operator
Our next phone question will come from Kenneth Bruce with Bank of America Merrill Lynch.
Kenneth Bruce - BofA Merrill Lynch, Research Division
I would like to pick up on the competition issue. Just more broadly, we're hearing from a number of auto lenders that there's been a pickup, or this is obviously not new, but their competition has been increasing. Can you give us some sense as to what that competitive dynamic looks like, if it's coming from either certain areas, whether that'd be geographies or competitors, what the kind of state of play is and how do you think that manifest itself? You've seen the spreads coming down, and then we're just kind of struggle here to figure out how this is impacting the business on a longer-term basis.
Brett A. Roberts
Again, I would just point to the volume per dealer, we didn't change pricing in the quarter. We haven't changed it now for 5 quarters. So the volume per dealer, I think, is a pretty good indication of what we think of the competitive environment.
Kenneth S. Booth
In terms of how it impacts the business, it obviously impacts volume per dealer, which shows up in unit volume. And as Brett mentioned, it impacts loan yields. And we've seen that in recent years.
Kenneth Bruce - BofA Merrill Lynch, Research Division
All right. Well, can you -- maybe you've provided it in the statistics and I missed it, but can you give us how much your sales force has either increased or decreased? Or any update in terms of operationally how you're looking to continue to drive the active dealer count?
Kenneth S. Booth
The number of sales people in the field increased -- actually was very constant over the course of 2013. You may recall that we increased the sales force a lot in 2011, 2012, have really just been focused on refining and enhancing the sales force over the course of the last year.
Kenneth Bruce - BofA Merrill Lynch, Research Division
And are there any plans to expand it further at this point? Do you feel like you've basically hit the level of penetration you can with the existing sales force?
Brett A. Roberts
No plans to expand it further from where we are now, but I think we have a lot of room still to fill in from a volume perspective with the people we've already added.
Operator
Next question in queue comes from John Hopkins with Chartwell Investment.
John M. Hopkins - Chartwell Investment Partners
Is there any material change in the percentage of loans that were purchased versus dealer loans during the quarter?
Kenneth S. Booth
Not materially. It's a couple of percentage points different, but it's not a material thing.
John M. Hopkins - Chartwell Investment Partners
And strategically going forward, I guess, to kind of keep the pipeline full, are you expecting that you may have to do more purchased loans as opposed to dealer loans?
Kenneth S. Booth
We don't expect that percentage to change. I mean, we offer both programs, and we let the dealers choose which one they prefer. So far, dealers overwhelmingly prefer the traditional portfolio program.
John M. Hopkins - Chartwell Investment Partners
Right. And I noticed in one of your notes, you're discussing a new profit-sharing arrangement you entered into as a third party provider. Can you talk a little bit more about that? I don't remember what that was.
Kenneth S. Booth
It relates to one of our vehicle service contract products that dealers can sell to consumers. And during 2012, we just negotiated the terms of that arrangement.
Operator
Our next phone question will come from Robert Dodd with Raymond James.
Robert J. Dodd - Raymond James & Associates, Inc., Research Division
Just on the dealership growth, again, I mean, how much -- can you give us any color on how much of that is from brand-new dealers to your product versus dealers who have been active in the past? And obviously, we can see that with some of the data that you give, but versus dealers who've been active in the past, but not active in recent quarters. Are you doing anything to incent guys who have been familiar with the product to come back to the fold, so to speak?
Brett A. Roberts
The new active dealers are dealers who are new to our program. There may be a small number of those that are the same dealers at the same location that we didn't flag as being the same dealers as we had on our program in years past, but it's a very small number.
Operator
Our next question in queue will come from Nick Zulovich with SubPrime Auto Finance News.
Nick Zulovich
Again, continuing the theme of the dealer network question, could you elaborate on whether you're drilling down deeper into the franchised dealer side to independents, metro markets versus rural markets? What categories of dealerships are you all bringing into the fold?
Brett A. Roberts
There's a wide variety of dealerships that would work on our program that works at -- are very small and dependent, and works at some of the largest franchise dealers in the country. So there's no real -- we're not targeting one group or the other. And the increases we're seeing are really across all groups.
Nick Zulovich
And just looking at the full-year numbers that the company was able to generate, just how satisfied are you with that performance? And just what's your evaluation of the company's performance as a whole?
Kenneth S. Booth
I mean, I'd say that we continue to be satisfied with the performance. We continue to grow net income, earnings per share, economic profit. We're growing the business in a challenging economic environment. So I'd say we're satisfied with the year.
Nick Zulovich
And again, looking forward, just what do you foresee as the impact to maintain compliance in light of the regulatory world changing? Just how is the company preparing to remain compliant as that element of the business continues to intensify?
Brett A. Roberts
Compliance is something we will always take in seriously. We regulate it in all 50 states we do business. So we're certainly used to having a strong compliance function. We've been doing this a long time. So we look at it as just a continuation of what we've done in the past.
Operator
Our next phone question will come from David Henle with DLH Capital.
David L. Henle
Just wanted -- you made a distinction on your collection rates between kind of October through December versus January through September. Does that 71.8%, given the current kind of competitive environment, is that what we should kind of expect going into 2014?
Kenneth S. Booth
I mean, that will depend on the mix of business that we receive. Again, we're indifferent between a collection rate of 75% and a collection rate of 70% since we vary the amount of capital that we deploy based on the expected performance of a loan. I mean, over the last 10 years, the average collection rate has been 72%, 73%. So that's kind of a reasonable zip code to think in terms of.
David L. Henle
And then I was just curious. I didn't see all the details of your recent refinancing. But I'm curious, given kind of the consistency that you guys have generated over many, many years, if the rating agencies are more inclined to think favorably about you and where your credit ratings are headed over time versus perhaps when you were newer in the business.
Kenneth S. Booth
We haven't been new in the business for a long time. We've been around for 40 years. And having said that, I think that the rating agencies acknowledge that we've demonstrated quite impressive results and operate with modest degrees of financial leverage. If you read the reports, they will cite other concerns that have an impact on the rating, uncertainty around the regulatory environment mono-line asset focus and the wholesale funding being a couple of the concerns. But I think that, and an answer to your question, I think they see our financial performance, and that we get credit for that.
Operator
[Operator Instructions] And it looks like our next question in queue will come from Moshe Orenbuch with Credit Suisse.
Moshe Orenbuch - Crédit Suisse AG, Research Division
You had mentioned that you expect a greater productivity from the sales force. Is that just a question of maturity or is there something else going on there?
Brett A. Roberts
No, a function of maturity. So if someone starts new and it's challenging to grow the dealer base, particularly in an area where we haven't had much success in the past. But over the time, as they pick up now as an expertise, it becomes easier.
Moshe Orenbuch - Crédit Suisse AG, Research Division
Right. And just a kind of detailed question. You raised $300 million of debt and are refinancing $350 million. Is the remaining $50 million going to come from existing cash? Or how should we think about that?
Kenneth S. Booth
It will come from borrowings on our revolving credit facilities.
Moshe Orenbuch - Crédit Suisse AG, Research Division
Got it. And you kind of alluded to being in a challenging economic environment. I mean, some of the elements of the economic environment and obviously the level of market interest rates and the like are pretty favorable. As you look out into 2014, does that economic environment get better or worse? I mean, how do you kind of think about it? And how do you kind of position your business in light of that?
Brett A. Roberts
I think when Doug talked about the economic environment, he was referring to the financial crisis in our performance through that period. The thing that's most challenging now isn't so much the economic environment, but the competitive environment.
Operator
And with no further questions in the queue, I'd like to turn the conference back over to Mr. Busk for any additional or closing remarks.
Douglas W. Busk
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 our Investor Relations mailbox at ir@creditacceptance.com. We look forward to talking to you again next quarter. Thank you.
Operator
Thank you, presenters. Once again, this does conclude today's conference. We thank you for your participation. Attendees, you may log off at this time.
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