UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): February 22, 2007
CREDIT ACCEPTANCE CORPORATION
(Exact name of registrant as specified in its charter)
Michigan 000-20202 38-1999511
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
25505 West Twelve Mile Road, Suite 3000,
Southfield, Michigan 48034-8339
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 248-353-2700
Not Applicable
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communication pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 5.02 DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS.
On February 22, 2007, the Compensation Committee (the "Compensation
Committee") of the Board of Directors of Credit Acceptance Corporation (the
"Company") approved the payment of executive bonuses for the year ended December
31, 2006, and determined the following for eligible executive officers of the
Company:
- Base salaries for 2007;
- Annual bonus payments for 2006;
- Restricted stock grants for 2006 pursuant to the Company's Incentive
Compensation Plan (the "Plan");
- A form of agreement to be used in connection with grants of restricted
stock awards under the Plan;
- A restricted stock unit award granted to the Chief Executive Officer;
and
- Incentive compensation bonus formula for 2007.
BASE SALARY INCREASES
The following table sets forth information regarding the new base
salaries for the executive officers named in the 2006 annual meeting proxy
statement and the Company's chief financial officer (collectively, the "Named
Executive Officers"):
2006 BASE 2007 BASE
EXECUTIVE OFFICER PRINCIPAL POSITION SALARY SALARY (A)
---------------------- -------------------------- --------- ----------
Donald A. Foss Chairman of the Board $475,000 $475,000
Brett A. Roberts Chief Executive Officer $400,000 $753,846
Steven M. Jones Chief Originations Officer $278,538 $476,923
Michael W. Knoblauch Chief Operating Officer $297,115 $388,462
Kenneth S. Booth Chief Financial Officer $235,384 $315,192
Keith P. McCluskey (B) Former President $223,750 $ --
(A) The Compensation Committee, based on a variety of factors, including
individual performance, competitive practices and industry norms, has
reviewed the Company's compensation policy and has set the base salaries
for the executive officers consistent with this policy. Base salary levels
for executive officers are determined by aligning external labor market
information with the executive officer's responsibilities, skills, and
individual performance. Salaries are reviewed annually and are adjusted
based on the recommendation of management. 2007 base salaries reflect the
fact that salary increases are effective February 5, 2007.
(B) Mr. McCluskey resigned from the Company effective September 1, 2006.
ANNUAL BONUS PAYMENTS FOR 2006 PERFORMANCE
The following table sets forth information regarding the annual bonus
payment amounts for 2006 for the Named Executive Officers:
2006 BONUS
EXECUTIVE OFFICER PRINCIPAL POSITION PAYMENT (A)
---------------------- -------------------------- -----------
Donald A. Foss Chairman of the Board $ --
Brett A. Roberts Chief Executive Officer $319,744
Steven M. Jones Chief Originations Officer $134,704
Michael W. Knoblauch Chief Operating Officer $159,872
Kenneth S. Booth Chief Financial Officer $ 70,736
Keith P. McCluskey (B) Former President $136,523
(A) The 2006 cash bonus was determined in accordance with the formula
determined by the Compensation Committee in accordance with the Company's
Incentive Compensation Plan (the "Plan"). Bonus amounts are based on a
percent of the amount of adjusted economic profit and a percent of the
change in adjusted economic profit generated by the Company. The Company
defines economic profit as net income (adjusted for non-recurring items)
less a cost of equity equal to 10% of average equity. The cash portion of
Named Executive Officers 2006 bonuses (other than Mr. Foss, who does not
receive variable compensation) were calculated as follows: 8.0% of the
change in economic profit year over year plus 0.8% of economic profit for
Mr. Roberts, the Chief Executive Officer; 3.4% and 0.3% for Mr. Jones, the
Chief Originations Officer; 4.0% and 0.4% for Mr. Knoblauch, the Chief
Operating Officer; 2.0% and 0.2% for Mr. Booth, the Chief Financial
Officer; and 3.3% and 0.3% for Mr. McCluskey, the Company's former
President. The bonus formula was applied to the Company's improvement of
economic profit from 2005 to 2006, and the determination of the actual
bonus amounts was approved by the Compensation Committee on February 22,
2007.
(B) Mr. McCluskey resigned from the Company effective September 1, 2006.
RESTRICTED STOCK GRANTS FOR 2006 PERFORMANCE
On February 22, 2007, the Compensation Committee approved the grant of
restricted stock to executive officers of the Company pursuant to the Plan. The
grants made to the Named Executive Officers are set forth below:
SHARES OF
RESTRICTED
EXECUTIVE OFFICER PRINCIPAL POSITION STOCK (A)
---------------------- -------------------------- ----------
Donald A. Foss Chairman of the Board --
Brett A. Roberts Chief Executive Officer 1,144
Steven M. Jones Chief Originations Officer 3,895
Michael W. Knoblauch Chief Operating Officer 5,530
Kenneth S. Booth Chief Financial Officer 4,650
Keith P. McCluskey (B) Former President --
(A) The amount of restricted stock grants was determined in accordance with the
formula determined by the Compensation Committee in accordance with the
Plan. Restricted stock awards were determined based upon a multiplier of
the cash portion of the variable compensation award, less current stock
option carrying costs for the individual. The process of considering
previous stock option grants provides a method to ensure the Company's
costs are aligned with the employee's organization level and performance.
For all of the Named Executive Officers, the multiplier was 2.0. The number
of shares granted was determined based on the average of the high and low
market prices of the Company's common stock on February 22, 2007, which was
$26.30 per share. The restricted stock grants vest in accordance with the
following schedule:
- 1/3 of the original number of Restricted Shares will vest on the
first anniversary of the Grant Date;
- 1/3 of the original number of Restricted Shares will vest on the
second anniversary of the Grant Date; and;
- The remaining 1/3 of the original number of Restricted Shares
will vest on the third anniversary of the Grant Date.
(B) Mr. McCluskey resigned from the Company effective September 1, 2006.
RESTRICTED STOCK GRANT FORM
On February 22, 2007, the Compensation Committee approved a form of
agreement to be used in connection with grants of restricted stock awards under
the Plan. The shares granted under the agreement are subject to transfer
restrictions, which lapse in three equal annual installments beginning one year
after the grant date. The recipient will be treated as the shareholder of record
with respect to such shares (including the right to vote and receive dividends
in respect of such shares) from the date of grant, unless the shares are
forfeited. The form of agreement is attached as Exhibit 10(q)(4) and
incorporated herein by reference.
RESTRICTED STOCK UNIT AWARD
On February 22, 2007, the Compensation Committee approved an award of
300,000 restricted stock units to Mr. Roberts, the Chief Executive Officer. Each
restricted stock unit represents and has a value equal to one share of common
stock of the Company. The restricted stock units will be earned over a five year
period based upon the annual increase in the Company's adjusted economic profit.
As a result of this grant, Mr. Roberts will not participate in other annual cash
bonuses or annual restricted stock grants over the five year period. Any earned
shares will be distributed to Mr. Roberts on February 22, 2014. The agreement is
attached as Exhibit 10(q)(5) and incorporated herein by reference.
INCENTIVE COMPENSATION BONUS FORMULA FOR 2007
On February 22, 2007, the Compensation Committee determined the 2007
annual bonus and restricted stock formulas for the Company's executive officers.
The 2007 cash bonus formula was determined in accordance with the formula
determined by the Compensation Committee in accordance with the Plan. Bonus
amounts are based on a percent of the change in adjusted economic profit
generated by the Company. The Company defines economic profit as net income
(adjusted for non-recurring items) less a cost of equity equal to 10% of average
equity. The formula for the cash portion of Named Executive Officers 2007
bonuses (other than Mr. Foss, who does not receive variable compensation) will
be the percentage change in economic profit year over year for each of the Named
Executive Officers multiplied by their base salary multiplied by the multiplier.
Restricted stock awards will be equivalent to the cash portion of the variable
compensation award, less current stock option carrying costs for the individual.
The process of considering previous stock option grants provides a method to
ensure the Company's costs are aligned with the employee's organization level
and performance. The multiplier will be 7.5 for Mr. Jones and Mr. Knoblauch and
5.0 for Mr. Booth, the Chief Financial Officer. Mr. Roberts, the Chief Executive
Officer, will not be eligible for a cash or restricted stock grant incentive
award due to his restricted stock unit award agreement mentioned above.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits.
10(q)(4) Form of Restricted Stock Grant Agreement.
10(q)(5) Restricted Stock Unit Award Agreement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CREDIT ACCEPTANCE CORPORATION
By: /s/ Kenneth S. Booth
-----------------------------------
Kenneth S. Booth
Chief Financial Officer
February 28, 2007
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
10(q)(4) Form of Restricted Stock Grant Agreement.
10(q)(5) Restricted Stock Unit Award Agreement.