What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-01 compared with 2021-07-29 · 129 added, 109 removed, 1410 unchanged (14% of the section changed)

3 unchanged sentences

(Dollars in millions, except per share data) As of

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Cash and cash equivalents $ 13.3 $ 16.0

21 unchanged sentences

Preferred stock, $ .01 par value, 1,000,000 shares authorized, none issued

Common stock, $ .01 par value, 80,000,000 shares authorized, 16,003,249 and 17,092,432 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

Common stock, $ .01 par value, 80,000,000 shares authorized, 14,716,977 and 17,092,432 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

Paid-in capital 166.0 161.9

7 unchanged sentences

(Dollars in millions, except per share data) For the Three Months Ended

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2021 2020 2021 2020

25 unchanged sentences

(In millions) For the Three Months Ended

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2021 2020 2021 2020

7 unchanged sentences

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Dollars in millions) For the Three Months Ended June 30, 2021

(Dollars in millions) For the Three Months Ended September 30, 2021

Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shareholders' Equity

2 unchanged sentences

Net income — — — 250.0 — 250.0

Other comprehensive loss — — — — ( 0.2 ) ( 0.2 )

Stock-based compensation — — 15.2 — — 15.2

3 unchanged sentences

Balance, end of period 14,716,977 $ 0.1 $ 166.0 $ 1,787.0 $ 0.7 $ 1,953.8

(Dollars in millions) For the Three Months Ended June 30, 2020

(Dollars in millions) For the Three Months Ended September 30, 2020

Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shareholders' Equity

6 unchanged sentences

Balance, end of period 17,649,382 $ 0.2 $ 160.4 $ 2,146.2 $ 1.7 $ 2,308.5

(Dollars in millions) For the Six Months Ended June 30, 2021

(Dollars in millions) For the Nine Months Ended September 30, 2021

Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shareholders' Equity

2 unchanged sentences

Net income — — — 740.7 — 740.7

Other comprehensive gain

— — — — ( 0.7 ) ( 0.7 )

Other comprehensive loss — — — — ( 0.9 ) ( 0.9 )

Stock-based compensation — — 5.4 — — 5.4

4 unchanged sentences

Balance, end of period 14,716,977 $ 0.1 $ 166.0 $ 1,787.0 $ 0.7 $ 1,953.8

(Dollars in millions) For the Six Months Ended June 30, 2020

(Dollars in millions) For the Nine Months Ended September 30, 2020

Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shareholders' Equity

13 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions) For the Six Months Ended June 30,

(In millions) For the Nine Months Ended September 30,

Cash Flows From Operating Activities:

4 unchanged sentences

Amortization 12.5 11.1

Provision (benefit) for deferred income taxes 11.0 ( 30.6 )

Benefit from deferred income taxes ( 4.1 ) ( 16.4 )

Stock-based compensation 5.4 4.7

33 unchanged sentences

Cash paid during the period for interest $ 115.9 $ 147.2

Cash paid during the period for income taxes $ 67.9 $ 0.8

Cash paid during the period for income taxes, net of refunds $ 112.3 $ 35.8

See accompanying notes to consolidated financial statements.

9 unchanged sentences

Actual results could differ from those estimates.

We have evaluated events and transactions occurring subsequent to the consolidated balance sheet date of June 30, 2021 for items that could potentially be recognized or disclosed in these financial statements.

We have evaluated events and transactions occurring subsequent to the consolidated balance sheet date of September 30, 2021 for items that could potentially be recognized or disclosed in these financial statements.

For additional information regarding subsequent events, see Note 16.

12 unchanged sentences

The following table shows the percentage of Consumer Loans assigned to us with either FICO ® scores below 650 or no FICO ® scores:

For the Three Months Ended June 30, For the Six Months Ended June 30,

For the Three Months Ended September 30, For the Nine Months Ended September 30,

Consumer Loan Assignment Volume 2021 2020 2021 2020

7 unchanged sentences

Dealer Loans and Purchased Loans are collectively referred to as “Loans”.

The following table shows the percentage of Consumer Loans assigned to us as Dealer Loans and Purchased Loans for each of the last six quarters:

The following table shows the percentage of Consumer Loans assigned to us as Dealer Loans and Purchased Loans for each of the last seven quarters:

Unit Volume Dollar Volume (1)

6 unchanged sentences

June 30, 2021 66.9 % 33.1 % 64.0 % 36.0 %

September 30, 2021 69.9 % 30.1 % 66.8 % 33.2 %

(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.

46 unchanged sentences

Cash equivalents consist of readily marketable securities with original maturities at the date of acquisition of three months or less.

As of June 30, 2021 and December 31, 2020, we had $ 382.4 million and $ 15.7 million, respectively, in cash and cash equivalents that were not insured by the Federal Deposit Insurance Corporation (“FDIC”).

As of September 30, 2021 and December 31, 2020, we had $ 13.0 million and $ 15.7 million, respectively, in cash and cash equivalents that were not insured by the Federal Deposit Insurance Corporation (“FDIC”).

Restricted cash and cash equivalents consist of cash pledged as collateral for secured financings and cash held in a trust for future vehicle service contract claims.

As of June 30, 2021 and December 31, 2020, we had $ 474.2 million and $ 376.9 million, respectively, in restricted cash and cash equivalents that were not insured by the FDIC.

As of September 30, 2021 and December 31, 2020, we had $ 426.0 million and $ 376.9 million, respectively, in restricted cash and cash equivalents that were not insured by the FDIC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

1 unchanged sentence

(In millions) As of

June 30, 2021 December 31, 2020 June 30, 2020 December 31, 2019

September 30, 2021 December 31, 2020 September 30, 2020 December 31, 2019

Cash and cash equivalents $ 13.3 $ 16.0 $ 8.9 $ 187.4

104 unchanged sentences

For additional information, see Note 6.

For the three and six months ended June 30, 2021 and 2020, we did not make any other methodology changes for Loans that had a material impact on our financial statements.

For the three and nine months ended September 30, 2021 and 2020, we did not make any other methodology changes for Loans that had a material impact on our financial statements.

Finance Charges

83 unchanged sentences

A comparison of the carrying amount and estimated fair value of these financial instruments is as follows:

(In millions) As of June 30, 2021 As of December 31, 2020

(In millions) As of September 30, 2021 As of December 31, 2020

Amount Estimated Fair

19 unchanged sentences

The following table provides the level of measurement used to determine the fair value for each of our financial instruments measured or disclosed at fair value:

(In millions) As of June 30, 2021

(In millions) As of September 30, 2021

Level 1 Level 2 Level 3 Total Fair Value

22 unchanged sentences

Restricted securities available for sale consist of the following:

(In millions) As of June 30, 2021

(In millions) As of September 30, 2021

Amortized Cost Gross Unrealized

16 unchanged sentences

The fair value and gross unrealized losses for restricted securities available for sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

(In millions) Securities Available for Sale with Gross Unrealized Losses as of June 30, 2021

(In millions) Securities Available for Sale with Gross Unrealized Losses as of September 30, 2021

Less than 12 Months 12 Months or More

27 unchanged sentences

(In millions) As of

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Contractual Maturity Amortized Cost Estimated Fair

8 unchanged sentences

Loans receivable and allowance for credit losses consist of the following:

(In millions) As of June 30, 2021

(In millions) As of September 30, 2021

Dealer Loans Purchased Loans Total

9 unchanged sentences

A summary of changes in Loans receivable and allowance for credit losses is as follows:

For the Three Months Ended June 30, 2021

For the Three Months Ended September 30, 2021

(In millions)

28 unchanged sentences

$ 5,776.6 $ 3,909.2 $ 9,685.8 $ ( 1,746.0 ) $ ( 1,357.2 ) $ ( 3,103.2 ) $ 4,030.6 $ 2,552.0 $ 6,582.6

For the Three Months Ended June 30, 2020

For the Three Months Ended September 30, 2020

(In millions)

29 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

For the Six Months Ended June 30, 2021

For the Nine Months Ended September 30, 2021

(In millions) Loans Receivable Allowance for Credit Losses Loans Receivable, Net

12 unchanged sentences

Balance, end of period $ 5,776.6 $ 3,909.2 $ 9,685.8 $ ( 1,746.0 ) $ ( 1,357.2 ) $ ( 3,103.2 ) $ 4,030.6 $ 2,552.0 $ 6,582.6

For the Six Months Ended June 30, 2020

For the Nine Months Ended September 30, 2020

(In millions) Loans Receivable Allowance for Credit Losses Loans Receivable, Net

26 unchanged sentences

(In millions)

For the Three Months Ended June 30, 2021

For the Three Months Ended September 30, 2021

Provision for Credit Losses

5 unchanged sentences

$ ( 9.5 ) $ 1.2 $ ( 8.3 )

(In millions) For the Three Months Ended June 30, 2020

(In millions) For the Three Months Ended September 30, 2020

Provision for Credit Losses Dealer Loans Purchased Loans Total

3 unchanged sentences

(In millions)

For the Six Months Ended June 30, 2021

For the Nine Months Ended September 30, 2021

Provision for Credit Losses

5 unchanged sentences

$ ( 36.8 ) $ 19.3 $ ( 17.5 )

(In millions) For the Six Months Ended June 30, 2020

(In millions) For the Nine Months Ended September 30, 2020

Provision for Credit Losses Dealer Loans Purchased Loans Total

6 unchanged sentences

(In millions)

For the Three Months Ended June 30, 2021

For the Three Months Ended September 30, 2021

New Consumer Loan Assignments

14 unchanged sentences

(In millions)

For the Three Months Ended June 30, 2020

For the Three Months Ended September 30, 2020

New Consumer Loan Assignments

12 unchanged sentences

$ 214.6 $ 142.2 $ 356.8

(In millions) For the Six Months Ended June 30, 2021

(In millions) For the Nine Months Ended September 30, 2021

New Consumer Loan Assignments Dealer Loans Purchased Loans Total

5 unchanged sentences

Expected net Loan income at the time of assignment (5) $ 657.4 $ 367.3 $ 1,024.7

(In millions) For the Six Months Ended June 30, 2020

(In millions) For the Nine Months Ended September 30, 2020

New Consumer Loan Assignments Dealer Loans Purchased Loans Total

16 unchanged sentences

(In millions)

For the Three Months Ended June 30, 2021

For the Three Months Ended September 30, 2021

Expected Future Net Cash Flows

13 unchanged sentences

(In millions)

For the Three Months Ended June 30, 2020

For the Three Months Ended September 30, 2020

Expected Future Net Cash Flows

12 unchanged sentences

$ 5,756.6 $ 3,896.3 $ 9,652.9

(In millions) For the Six Months Ended June 30, 2021

(In millions) For the Nine Months Ended September 30, 2021

Expected Future Net Cash Flows Dealer Loans Purchased Loans Total

5 unchanged sentences

Balance, end of period $ 5,459.4 $ 3,868.8 $ 9,328.2

(In millions) For the Six Months Ended June 30, 2020

(In millions) For the Nine Months Ended September 30, 2020

Expected Future Net Cash Flows Dealer Loans Purchased Loans Total

15 unchanged sentences

For additional information regarding credit quality, see Note 3.

The following table compares our forecast of Consumer Loan collection rates as of June 30, 2021 with the forecasts as of March 31, 2021, December 31, 2020 and at the time of assignment, segmented by year of assignment:

Total Loans as of June 30, 2021

The following table compares our forecast of Consumer Loan collection rates as of September 30, 2021 with the forecasts as of June 30, 2021, December 31, 2020 and at the time of assignment, segmented by year of assignment:

Total Loans as of September 30, 2021

Forecasted Collection Percentage as of (1) Current Forecast Variance from

Consumer Loan

Assignment Year June 30, 2021 March 31, 2021 December 31, 2020 Initial

Forecast March 31, 2021 December 31, 2020 Initial

Assignment Year September 30, 2021 June 30, 2021 December 31, 2020 Initial

Forecast June 30, 2021 December 31, 2020 Initial

2012 73.8 % 73.8 % 73.8 % 71.4 % 0.0 % 0.0 % 2.4 %

8 unchanged sentences

2021 66.4 % 65.8 % — 66.0 % 0.6 % — 0.4 %

Dealer Loans as of June 30, 2021

Dealer Loans as of September 30, 2021

Forecasted Collection Percentage as of (1) (2) Current Forecast Variance from

Consumer Loan

Assignment Year June 30, 2021 March 31, 2021 December 31, 2020 Initial

Forecast March 31, 2021 December 31, 2020 Initial

Assignment Year September 30, 2021 June 30, 2021 December 31, 2020 Initial

Forecast June 30, 2021 December 31, 2020 Initial

2012 73.6 % 73.6 % 73.6 % 71.3 % 0.0 % 0.0 % 2.3 %

9 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Purchased Loans as of June 30, 2021

Purchased Loans as of September 30, 2021

Forecasted Collection Percentage as of (1) (2) Current Forecast Variance from

Consumer Loan

Assignment Year June 30, 2021 March 31, 2021 December 31, 2020 Initial

Forecast March 31, 2021 December 31, 2020 Initial

Assignment Year September 30, 2021 June 30, 2021 December 31, 2020 Initial

Forecast June 30, 2021 December 31, 2020 Initial

2012 75.9 % 75.9 % 75.9 % 71.4 % 0.0 % 0.0 % 4.5 %

13 unchanged sentences

We evaluate and adjust the expected collection rate of each Consumer Loan subsequent to assignment primarily through the monitoring of consumer payment behavior.

The following table summarizes the past-due status of Consumer Loan assignments as of June 30, 2021 and December 31, 2020, segmented by year of assignment:

The following table summarizes the past-due status of Consumer Loan assignments as of September 30, 2021 and December 31, 2020, segmented by year of assignment:

(In millions)

Total Loans as of June 30, 2021 (1) (2)

Total Loans as of September 30, 2021 (1) (2)

Pre-term Consumer Loans (3)

9 unchanged sentences

(In millions)

Dealer Loans as of June 30, 2021 (1)

Dealer Loans as of September 30, 2021 (1)

Pre-term Consumer Loans (3)

10 unchanged sentences

(In millions)

Purchased Loans as of June 30, 2021 (2)

Purchased Loans as of September 30, 2021 (2)

Pre-term Consumer Loans (3)

54 unchanged sentences

Under CECL, changes in the amount and timing of forecasted net cash flows are recorded as a provision for credit losses in the current period.

While the adjustment to our forecast, which we continued to apply through the second quarter of 2021, represents our best estimate at this time, the COVID-19 pandemic has created conditions that increase the level of uncertainty associated with our estimate of the amount and timing of future net cash flows from our Loan portfolio.

We have continued to apply this adjustment to our forecast through the third quarter of 2021 as it continues to represent our best estimate of the impact of the COVID-19 pandemic on future net cash flows.

The COVID-19 pandemic has created conditions that increase the level of uncertainty associated with our estimate of the amount and timing of future net cash flows from our Loan portfolio.

A summary of reinsurance activity is as follows:

(In millions) For the Three Months Ended

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2021 2020 2021 2020

5 unchanged sentences

(In millions) As of

Balance Sheet location June 30, 2021 December 31, 2020

Balance Sheet location September 30, 2021 December 31, 2020

Trust assets Restricted cash and cash equivalents $ 0.1 $ 0.7

5 unchanged sentences

Other income consists of the following:

(In millions) For the Three Months Ended June 30, For the Six Months Ended June 30,

(In millions) For the Three Months Ended September 30, For the Nine Months Ended September 30,

2021 2020 2021 2020

27 unchanged sentences

The following table disaggregates our other income by major source of income and timing of the revenue recognition:

(In millions) For the Three Months Ended June 30, 2021

(In millions) For the Three Months Ended September 30, 2021

Ancillary product profit sharing Remarketing fees Dealer enrollment fees Dealer support products and services Interest Other Total Other Income

7 unchanged sentences

Total $ 9.6 $ 1.9 $ 0.5 $ 0.2 $ 0.2 $ 0.2 $ 12.6

(In millions) For the Six Months Ended June 30, 2021

(In millions) For the Nine Months Ended September 30, 2021

Ancillary product profit sharing Remarketing fees Dealer enrollment fees Dealer support products and services Interest Other Total Other Income

9 unchanged sentences

Debt consists of the following:

(In millions) As of June 30, 2021

(In millions) As of September 30, 2021

Principal Outstanding Unamortized Debt Issuance Costs Carrying

11 unchanged sentences

Total debt $ 4,635.1 $ ( 26.5 ) $ 4,608.6

(1) Excludes deferred debt issuance cost s of $ 2.5 million an d $ 3.2 million as of June 30, 2021 and December 31, 2020, respectively, which are included in other assets.

(1) Excludes deferred debt issuance cost s of $ 2.3 million and $ 3.2 million as of September 30, 2021 and December 31, 2020, respectively, which are included in other assets.

(2) Warehouse facilities and Term ABS.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

General information for each of our financing transactions in place as of June 30, 2021 is as follows:

General information for each of our financing transactions in place as of September 30, 2021 is as follows:

(Dollars in millions)

2 unchanged sentences

Amount Interest Rate Basis as of

June 30, 2021

September 30, 2021

Revolving Secured Line of Credit n/a 06/22/2023 $ 340.0 (1) At our option, either LIBOR plus 187.5 basis points or the prime rate plus 87.5 basis points

12 unchanged sentences

Term ABS 2020-3 (2) Credit Acceptance Funding LLC 2020-3 10/17/2022 (3) 600.0 Fixed rate

Term ABS 2021-1 (2) Credit Acceptance Funding LLC 2021-1 02/15/2023 (3) 100.0 LIBOR plus 198.5 basis points (4)

4 unchanged sentences

Mortgage Note (2) Chapter 4 Properties, LLC 08/06/2023 12.0 LIBOR plus 150 basis points

(1) The amount of the facility will decrease to $305.0 million on June 22, 2022.

(1) The amount of the facility will decrease by $35.0 million on June 22, 2022.

For additional information, see Note 16.

(2) Financing made available only to a specified subsidiary of the Company.

12 unchanged sentences

(In millions) For the Three Months Ended

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2021 2020 2021 2020

22 unchanged sentences

(Dollars in millions) As of

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Revolving Secured Line of Credit

117 unchanged sentences

We have a $ 340.0 million revolving secured line of credit facility with a commercial bank syndicate.

The amount of the facility will decrease to $305.0 million on June 22, 2022.

The amount of the facility will decrease by $35.0 million on June 22, 2022.

For additional information, see Note 16.

Borrowings under the revolving secured line of credit facility, including any letters of credit issued under the facility, are subject to a borrowing-base limitation.

11 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The subsidiaries pay us a monthly servicing fee equal to 6 % (4% for Warehouse Facility II) of the collections received with respect to the contributed Loans.

The subsidiaries pay us a monthly servicing fee equal to 6 % (4% for Warehouse Facility II and Warehouse Facility VIII) of the collections received with respect to the contributed Loans.

The servicing fee is paid out of the collections.

24 unchanged sentences

Contributed at Closing Revolving Period

Term ABS 2018-2 May 24, 2018 $ 562.6 Through May 15, 2020

Term ABS 2018-3 August 23, 2018 $ 500.1 Through August 17, 2020

30 unchanged sentences

Debt Covenants

As of June 30, 2021, we were in compliance with our covenants under the revolving secured line of credit facility and our Warehouse facilities, including those that require the maintenance of certain financial ratios and other financial conditions.

As of September 30, 2021, we were in compliance with our covenants under the revolving secured line of credit facility and our Warehouse facilities, including those that require the maintenance of certain financial ratios and other financial conditions.

These covenants require a minimum ratio of (1) our net earnings, adjusted for specified items, before income taxes, depreciation, amortization and fixed charges to (2) our fixed charges, as defined in the agreements.

4 unchanged sentences

Our Term ABS financings also contain covenants that measure the performance of the contributed assets.

As of June 30, 2021, we were in compliance with all such covenants.

As of September 30, 2021, we were in compliance with all such covenants.

As of the end of the quarter, we were also in compliance with our covenants under the senior notes indentures.

3 unchanged sentences

We utilize interest rate cap agreements to manage the interest rate risk on certain secured financings.

The following tables provide the terms of our interest rate cap agreements that were in effect as of June 30, 2021 and December 31, 2020:

The following tables provide the terms of our interest rate cap agreements that were in effect as of September 30, 2021 and December 31, 2020:

(Dollars in millions)

As of June 30, 2021

As of September 30, 2021

Facility Amount Facility Name Purpose Start End Notional Cap Interest Rate (1)

19 unchanged sentences

The interest rate caps have not been designated as hedging instruments.

As of June 30, 2021 and December 31, 2020, the interest rate caps had a fair value of $ 0.1 million as the capped rates were significantly above market rates.

As of September 30, 2021 and December 31, 2020, the interest rate caps had a fair value of $ 0.1 million as the capped rates were significantly above market rates.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

2 unchanged sentences

For the Three Months Ended

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2021 2020 2021 2020

6 unchanged sentences

State income taxes include non-deductible expenses related to uncertain tax positions.

The impact of these non-deductible expenses on our effective income tax rate decreased from 2020 to 2021 primarily due to an increase in pre-tax income.

The impact of these non-deductible expenses on our effective income tax rate for the three months ended September 30, 2021 increased from the same period in 2020 primarily due to an increase in the proportion of pre-tax income reserved for uncertain tax positions.

Excess tax benefits from stock-based compensation plans

4 unchanged sentences

Other items impacting our effective income tax rate primarily consist of non-deductible executive compensation expenses.

The impact on our effective income tax rate decreased from 2020 to 2021 primarily due to the increase in pre-tax income.

The impact of other items on our effective income tax rate for the three months ended September 30, 2021 increased from the same period in 2020 primarily due to an increase in non-deductible executive compensation, which was primarily the result of stock options granted under our Amended and Restated Incentive Compensation Plan, which was approved by shareholders in July 2021.

The impact of other items on our effective income tax rate for the nine months ended September 30, 2021 decreased from the same period in 2020 primarily due to the increase in pre-tax income.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

NET INCOME PER SHARE

3 unchanged sentences

For the Three Months Ended

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2021 2020 2021 2020

3 unchanged sentences

Basic number of weighted average shares outstanding 15,795,963 17,844,785 16,543,326 17,957,931

Dilutive effect of restricted stock and restricted stock units 4,090 2,265 20,886 20,042

Dilutive effect of restricted stock, restricted stock units and stock options 33,203 4,980 16,313 15,160

Dilutive number of weighted average shares outstanding 15,829,166 17,849,765 16,559,639 17,973,091

For the three and six months ended June 30, 2021, there were no shares of restricted stock and restricted stock units that were not included in the computation of diluted net income per share because their inclusion would have been anti-dilutive.

For the three and six months ended June 30, 2020, there were 5,285 shares of restricted stock and restricted stock units that were not included in the computation of diluted net income per share because their inclusion would have been anti-dilutive.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

For the three and nine months ended September 30, 2021, there were 120,217 and 204,557 stock options outstanding, respectively, that were excluded from the computation of diluted net income per share because their inclusion would have been anti-dilutive.

For the three and nine months ended September 30, 2021, there were no shares of restricted stock or restricted stock units outstanding that were excluded from the computation of diluted net income per share because their inclusion would have been anti-dilutive.

For the three and nine months ended September 30, 2020, there were no stock options, shares of restricted stock, or restricted stock units outstanding that were excluded from the computation of diluted net income per share because their inclusion would have been anti-dilutive.

STOCK REPURCHASES

The following table summarizes our stock repurchases for the three and six months ended June 30, 2021 and 2020:

(Dollars in millions) For the Three Months Ended June 30,

The following table summarizes our stock repurchases for the three and nine months ended September 30, 2021 and 2020:

(Dollars in millions) For the Three Months Ended September 30,

Number of Shares Repurchased Cost Number of Shares Repurchased Cost

Open Market (1) 1,286,246 $ 704.1 — $ —

(Dollars in millions) For the Six Months Ended June 30,

(Dollars in millions) For the Nine Months Ended September 30,

Stock Repurchases Number of Shares Repurchased Cost Number of Shares Repurchased Cost

2 unchanged sentences

Total 2,277,817 $ 1,093.9 725,220 $ 307.1

(1) Represents repurchases under authorizations by the board of directors for the repurchase of shares by us from time to time in the open market or in privately negotiated transactions.

On March 5, 2020, the board of directors authorized the repurchase of up to three million shares of our common stock in addition to the board’s prior authorizations.

As of June 30, 2021, we had authorization to repurchase 1,518,105 shares of our common stock.

(1) Represents repurchases under authorizations by the board of directors for the repurchase of shares by us from time to time in the open market through privately negotiated transactions, through block trades, pursuant to trading plans adopted in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934 or otherwise.

On September 28, 2021, the board of directors authorized the repurchase of up to two million shares of our common stock in addition to the board’s prior authorizations.

As of September 30, 2021, we had authorization to repurchase 2,231,859 shares of our common stock.

(2) Represents shares of common stock released to us by team members as payment of tax withholdings upon the vesting of restricted stock and restricted stock units and the conversion of restricted stock units to common stock.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STOCK-BASED COMPENSATION PLANS

1 unchanged sentence

(In millions) For the Three Months Ended

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2021 2020 2021 2020

Stock options $ 14.7 $ — $ 14.7 $ —

Restricted stock 0.1 0.4 ( 7.8 ) 1.5

1 unchanged sentence

Total $ 15.2 $ 1.5 $ 5.4 $ 4.7

The reversal of stock-based compensation expense for the three and six months ended June 30, 2021 was primarily due to the forfeiture of unvested restricted stock and restricted stock units upon the retirement of our former Chief Executive Officer in May 2021, which resulted in an $11.5 million reversal of stock-based compensation expense.

During the third quarter of 2021, we recognized $ 14.7 million in stock-based compensation expense for stock options granted under our Amended and Restated Incentive Compensation Plan, which was approved by shareholders in July 2021.

During the second quarter of 2021, we recognized an $ 11.5 million reversal of stock-based compensation expense due to the forfeiture of unvested restricted stock and restricted stock units upon the retirement of our former Chief Executive Officer in May 2021.

A summary of the non-vested restricted stock activity is presented below:

3 unchanged sentences

Forfeited ( 109,054 ) 106.67

Non-vested as of June 30, 2021 1,560 $ 441.54

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Non-vested as of September 30, 2021 1,534 $ 441.54

A summary of the restricted stock unit activity is presented below:

5 unchanged sentences

Forfeited ( 31,418 ) 110.33

Outstanding as of June 30, 2021 377,259 $ 143.98

Stock option grants subject to shareholder approval

Outstanding as of September 30, 2021 377,070 $ 143.85

Stock option grants

From December 2020 through June 2021, we granted 770,500 time-based stock options with a weighted average exercise price of $ 346.94 per share to certain team members and a new member of our board of directors, subject to shareholder approval of an amendment to our Amended and Restated Incentive Compensation Plan (“Shareholder Approval”).

4 unchanged sentences

Shareholder Approval was received at our annual meeting of shareholders on July 21, 2021.

Accordingly, the accounting grant date of the 770,500 time-based stock options we awarded from December 2020 through June 2021 is July 21, 2021.

The $ 145.3 million grant date fair value of those stock options will be recognized as stock-based compensation expense over the requisite service period.

No stock-based compensation expense was recognized for stock options for the three and six months ended June 30, 2021.

Accordingly, the accounting grant date of the 770,500 previously-awarded time-based stock options was July 21, 2021.

The $ 145.3 million grant date fair value of those stock options is being recognized as stock-based compensation expense over the requisite service period.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

During the third quarter of 2021, we granted an additional 8,000 time-based stock options with an exercise price of $ 563.10 per share and a grant date fair value of $ 171.36 per share.

We expect to recognize the future expense of the stock options as follows:

(in millions)

For the Years Ended December 31, Total Projected Expense of

Year Total Projected Expense of

Stock Options

Remainder of 2021 $ 18.9

Total $ 130.6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

COMMITMENTS AND CONTINGENCIES

16 unchanged sentences

The Company intends to vigorously defend itself in this matter.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

On May 7, 2019, we received a subpoena from the Consumer Frauds and Protection Bureau of the Office of the New York State Attorney General, relating to the Company’s origination and collection policies and procedures in the state of New York.

8 unchanged sentences

As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this investigation.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

On April 22, 2019, we received a civil investigative demand from the Bureau of Consumer Financial Protection (the “Bureau”) seeking, among other things, certain information relating to the Company’s origination and collection of Consumer Loans, TPPs and credit reporting.

17 unchanged sentences

The Company intends to vigorously defend itself in this matter.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

On March 18, 2016, we received a subpoena from the Attorney General of the State of Maryland, relating to the Company’s repossession and sale policies and procedures in the state of Maryland.

8 unchanged sentences

As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this investigation.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONCLUDED)

On December 4, 2014, we received a civil investigative demand from the Office of the Attorney General of the Commonwealth of Massachusetts relating to the origination and collection of non-prime auto loans in Massachusetts.

5 unchanged sentences

On March 15, 2021, the court entered an order denying a motion by the Company to dismiss four of the Commonwealth’s seven claims and granting in part and denying in part a motion by the Commonwealth for partial summary judgment on three of its claims.

On April 27, 2021, the Company and the Commonwealth reached an agreement in principle to settle this lawsuit, and, as a result, we have estimated a probable loss of $ 27.2 million, all of which was recognized as a contingent loss during the first quarter of 2021.

On April 27, 2021, the Company and the Commonwealth reached an agreement in principle to settle this lawsuit, and, as a result, we estimated a probable loss of $ 27.2 million, all of which was recognized as a contingent loss during the first quarter of 2021.

On September 1, 2021, we entered into a settlement agreement with the Office of the Attorney General, reflecting the parties’ agreement to settle and fully resolve the claims asserted against us.

We agreed to make a payment in the total amount of $ 27.2 million to an independent trust for purposes of making payments to provide relief for eligible Massachusetts consumers, paying costs of implementation of the agreement and paying the Attorney General’s costs of investigation, and to pay up to $ 95,000 to cover costs and expenses incurred by an independent trustee for management of the independent trust.

An adverse ultimate disposition in any action to which we are a party or otherwise subject could have a material adverse impact on our financial position, liquidity and results of operations.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONCLUDED)

SUBSEQUENT EVENTS

On July 21, 2021, we received Shareholder Approval and measured the grant date fair value of the stock option grants.

For additional information regarding stock option grants, see Note 14.

On October 6, 2021, we increased the financing amount on our revolving secured line of credit facility with a commercial bank syndicate from $ 340.0 million to $ 385.0 million.

We also extended the maturity of the facility from June 22, 2023 to June 22, 2024.

The amount of the facility will decrease from $ 385.0 million to $ 350.0 million on June 22, 2022, and will further decrease from $ 350.0 million to $ 325.0 million on June 22, 2023.

On October 15, 2021, we extended the date on which our $ 75.0 million Warehouse Facility VI will cease to revolve from September 30, 2022 to September 30, 2024.

On October 28, 2021, we completed a $ 250.1 million Term ABS financing, which was used to repay outstanding indebtedness and for general corporate purposes.

The financing has an expected annualized cost of approximately 1.8% (including the initial purchasers’ fees and other costs), and it will revolve for 24 months, after which it will amortize based upon the cash flows on the contributed Loans.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements