cpss8k_dtd12oct15.htm



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 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) October 15, 2012

 
CONSUMER PORTFOLIO SERVICES, INC.
 
 
(Exact Name of Registrant as Specified in Charter)
 

 
 
 CALIFORNIA
 
1-11416
 
33-0459135
 
 
(State or Other Jurisdiction
of Incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
 



 
19500 Jamboree Road, Irvine, CA 92612
 
 
(Address of Principal Executive Offices) (Zip Code)
 

Registrant's telephone number, including area code (949) 753-6800

 
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 (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


 


 
 

 

ITEM 2.02  RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
 
On October 15, 2012, the registrant announced its earnings for the quarter and nine-month periods ended September 30, 2012.  A copy of the announcement is attached as an exhibit to this report.
 
 
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
 
         (c) Exhibits.
 
99.1   News Release dated October 15, 2012.
 
 
 
 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


 
CONSUMER PORTFOLIO SERVICES, INC.
   
Dated: October 15, 2012
By: /s/ JEFFREY P. FRITZ
 
 
Jeffrey P. Fritz
Senior Vice President and Chief Financial Officer
Signing on behalf of the registrant

 

cpss8k_ex991dtd12oct15.htm
   
 
 
 
 
 
 
NEWS RELEASE
     

CPS ANNOUNCES THIRD QUARTER 2012 EARNINGS

§  
Net income of $2.7 million, or $0.11 per share
§  
New contract purchases of $143 million
§  
Total managed portfolio increases to $845 million from $806 million in June 2012
 
 
IRVINE, California, October 15, 2012 (GlobeNewswire) -- Consumer Portfolio Services, Inc. (Nasdaq: CPSS) (“CPS” or the “Company”) today announced earnings of $2.7 million, or $0.11 per diluted share, for its third quarter ended September 30, 2012.  This compares to a net loss of $4.0 million, or $0.20 per diluted share, in the third quarter of 2011.  Earnings for the first nine months of 2012 were $4.6 million, or $0.19 per diluted share, as compared to a net loss of $14.7 million, or $0.78 per diluted share, for the same period in 2011.

Revenues for the third quarter of 2012 were $47.9 million, an increase of approximately $14.1 million, or 42%, compared to $33.8 million for the third quarter of 2011.  Total operating expenses for the third quarter of 2012 were $45.2 million, an increase of $7.3 million, or 19%, compared to $37.9 million for the 2011 period.  Pretax income for the third quarter of 2012 was $2.7 million compared to pretax loss of $4.0 million in the third quarter of 2011.

For the nine months ended September 30, 2012 total revenues were $136.6 million compared to $97.4 million for the nine months ended September 30, 2011, an increase of approximately $39.2 million, or 40%.  Total expenses for the nine months ended September 30, 2012 were $132.0 million, an increase of $20.0 million, or 18%, compared to $112.1 million for the nine months ended September 30, 2011.  Pretax income for the nine months ended September 30, 2012 was $4.6 million, compared to pretax loss of $14.7 million for the nine months ended September 30, 2011.

During the third quarter of 2012, CPS purchased $143.1 million of new contracts compared to $137.9 million during the second quarter of 2012 and $81.2 million during the third quarter of 2011.  The Company's managed receivables totaled $844.9 million as of September 30, 2012, an increase from $806.1 million as of June 30, 2012 and $827.8 million as of September 30, 2011, as follows ($ in millions):

Originating Entity
September 30, 2012
June 30, 2012
September 30, 2011
CPS
$748.8
$681.5
$572.5
Fireside Bank
80.3
104.0
210.9
TFC
0.4
0.6
3.1
As Third Party Servicer
15.4
20.0
41.3
     Total
$844.9
$806.1
$827.8

Annualized net charge-offs for the third quarter of 2012 were 3.35% of the average owned portfolio as compared to 4.13% for the third quarter of 2011.  Delinquencies greater than 30 days
 
 
 

 
(including repossession inventory) were 4.64% of the total owned portfolio as of September 30, 2012, as compared to 6.54% as of September 30, 2011.

As previously reported, during September CPS closed its third term securitization transaction of 2012 and the sixth transaction in the last 18 months. In the senior subordinate structure, a special purpose subsidiary sold five tranches of asset-backed notes totaling $147.0 million.  The notes are secured by automobile receivables purchased by CPS and have a weighted average effective coupon of approximately 2.45%. The transaction has initial credit enhancement consisting of a cash deposit equal to 1.00% of the original receivable pool balance.  The final enhancement level requires accelerated payment of principal on the notes to reach overcollateralization of 11.00% of the then-outstanding receivable pool balance.

"We are extremely pleased with our third quarter financial results," said Charles E. Bradley, Jr., Chairman and Chief Executive Officer.  "It was our first quarter of organic sequential revenue growth since 2007 and the onset of the financial crisis.  This demonstrates that we are well positioned within the auto finance industry to continue growing our managed portfolio. And as we fund this growth with cost-efficient securitizations, our net interest margin is expanding significantly.  These two components have been big drivers of our earnings growth over the last year.”


Conference Call

CPS announced that it will hold a conference call on Tuesday, October 16, 2012, at 1:00 p.m. ET to discuss its quarterly operating results.  Those wishing to participate by telephone may dial-in at 877 312-5502 or 253 237-1131 approximately 10 minutes prior to the scheduled time.
 
A replay will be available between October 16, 2012 and October 23, 2012, beginning two hours after conclusion of the call, by dialing 855 859-2056 or 404 537-3406 for international participants, with conference identification number 43148332.  A broadcast of the conference call will also be available live and for 90 days after the call via the Company’s web site at www.consumerportfolio.com.
 
About Consumer Portfolio Services, Inc.

Consumer Portfolio Services, Inc. is an independent specialty finance company that provides indirect automobile financing to individuals with past credit problems, low incomes or limited credit histories. We purchase retail installment sales contracts primarily from franchised automobile dealerships secured by late model used vehicles and, to a lesser extent, new vehicles. We fund these contract purchases on a long-term basis primarily through the securitization markets and service the contracts over their lives.

Forward-looking statements in this news release include the Company's recorded revenue, expense and provision for credit losses, because these items are dependent on the Company’s estimates of future losses.  The accuracy of such estimates may be adversely affected by various factors, which include (in addition to risks relating to the economy generally) the following: possible increased delinquencies; repossessions and losses on retail installment contracts; incorrect prepayment speed and/or discount rate assumptions; possible unavailability of qualified personnel, which could adversely affect the Company’s ability to service its portfolio; possible increases in the rate
 
 
 

 
 
of consumer bankruptcy filings, which could adversely affect the Company’s rights to collect payments from its portfolio; other changes in government regulations affecting consumer credit; possible declines in the market price for used vehicles, which could adversely affect the Company’s realization upon repossessed vehicles; and economic conditions in geographic areas in which the Company's business is concentrated. All of such factors also may affect the Company’s future financial results, as to which there can be no assurance. Any implication that the results of the most recently completed quarter are indicative of future results is disclaimed, and the reader should draw no such inference. Factors such as those identified above in relation to provision for credit losses may affect future performance.

Investor Relations Contact

Robert E. Riedl, Chief Investment Officer
949 753-6800



 
 

 

Consumer Portfolio Services, Inc. and Subsidiaries
             
Condensed Consolidated Statements of Operations
             
(In thousands, except per share data)
             
(Unaudited)
             
                           
     
 Three months ended
   
 Nine months ended
 
     
 September 30,
   
 September 30,
 
     
2012
   
2011
   
2012
   
2011
 
Revenues:
                         
Interest income
   
 $    45,053
   
 $    30,236
   
 $ 127,210
   
 $   86,632
 
Servicing fees
   
            502
   
             986
   
         1,897
   
        3,530
 
Other income
   
         2,365
   
         2,592
   
         7,481
   
        7,201
 
     
       47,920
   
       33,814
   
    136,588
   
      97,363
 
Expenses:
                         
Employee costs
   
8,730
   
8,257
   
      25,878
   
      23,343
 
General and administrative
   
         3,690
   
         3,286
   
      11,765
   
      10,697
 
Interest
   
       19,560
   
       19,011
   
      61,696
   
      57,377
 
Provision for credit losses
   
         9,465
   
         3,982
   
      22,012
   
      12,034
 
Other expenses
   
         3,747
   
         3,324
   
      10,657
   
        8,607
 
     
       45,192
   
       37,860
   
    132,008
   
    112,058
 
Income (loss) before income taxes
 
         2,728
   
       (4,046)
   
         4,580
   
    (14,695)
 
Income taxes
   
                  -
   
                  -
   
                 -
   
                 -
 
      Net income (loss)
   
 $      2,728
   
 $    (4,046)
   
 $     4,580
   
 $ (14,695)
 
                           
Earnings (loss) per share:
                         
     Basic
   
 $        0.14
   
 $      (0.20)
   
 $        0.24
   
 $     (0.78)
 
     Diluted
   
 $        0.11
   
 $      (0.20)
   
 $        0.19
   
 $     (0.78)
 
                           
Number of shares used in computing earnings (loss)
                 
   per share:
                         
     Basic
   
       19,495
   
       19,821
   
      19,406
   
      18,794
 
     Diluted
   
       25,695
   
       19,821
   
      24,026
   
      18,794
 
                           
                           
Condensed Consolidated Balance Sheets
             
(In thousands)
             
(Unaudited)
             
                           
                           
      September 30,     December 31,              
     
2012
 
 
2011
             
                           
Cash
   
 $    10,468
   
 $    10,094
             
Restricted cash
   
107,240
   
159,228
             
Total Cash
   
117,708
   
169,322
             
                           
Finance receivables
   
687,096
   
516,630
             
Allowance for finance credit losses
(16,946)
   
(10,351)
             
Finance receivables, net
   
670,150
   
506,279
             
                           
Finance receivables measured at fair value
77,484
   
160,253
             
Residual interest in securitizations
 
4,895
   
4,414
             
Deferred tax assets, net
   
15,000
   
15,000
             
Other assets
   
37,628
   
34,782
             
     
 $ 922,865
   
 $  890,050
             
                           
Accounts payable and other liabilities
 $    22,146
   
 $    27,993
             
Warehouse lines of credit
   
20,398
   
25,393
             
Residual interest financing
   
13,773
   
21,884
             
Debt secured by receivables measured at fair value
76,630
   
166,828
             
Securitization trust debt
   
721,396
   
583,065
             
Senior secured debt, related party
 
54,452
   
58,344
             
Subordinated debt
   
21,525
   
20,750
             
     
930,320
   
904,257
             
                           
Shareholders' equity
   
(7,455)
   
(14,207)
             
     
 $ 922,865
   
 $  890,050
             
                           
                           
                           
                           
                           

 
 

 
 
Operating and Performance Data ($ in millions)
                 
                           
     
 At and for the
   
 At and for the
 
     
 Three months ended
   
 Nine months ended
 
     
 September 30,
   
 September 30,
 
     
2012
   
2011
   
2012
   
2011
 
                           
Contracts purchased
   
 $    143.11
   
 $      81.17
   
 $   400.91
   
 $   192.02
 
Contracts securitized
   
       154.70
   
       111.05
   
      437.90
   
      215.60
 
                           
Total managed portfolio
   
 $    844.86
   
 $    827.80
   
 $   844.86
   
 $   827.80
 
Average managed portfolio
   
       831.30
   
       691.24
   
      803.27
   
      669.03
 
                           
Allowance for finance credit losses as % of fin. receivables
2.47%
   
1.97%
             
                           
Aggregate allowance as % of fin. receivables (1)
3.13%
   
2.91%
             
                           
Delinquencies
                         
31+ Days
   
3.33%
   
5.08%
             
Repossession Inventory
   
1.31%
   
1.46%
             
Total Delinquencies and Repo. Inventory
   
4.64%
   
6.54%
             
                       
                           
Annualized net charge-offs as % of average owned portfolio
3.35%
   
4.13%
   
3.47%
   
6.56%
 
                           
Recovery rates (2)
   
47.2%
   
43.2%
   
48.2%
   
44.0%
 
                           
     
 For the
 
 For the
     
 Three months ended
 
 Nine months ended
     
 September 30,
 
 September 30,
     
2012
   
2011
   
2012
   
2011
 
     
$
% (3)
$
% (3)
$
% (3)
 
$
% (3)
Interest income
   
 $           45.1
21.7%
 
 $           30.2
17.5%
 
 $        127.2
21.1%
 
 $          86.6
17.3%
Servicing and other income
   
               2.9
1.4%
 
               3.6
2.1%
 
               9.4
1.6%
 
             10.7
2.1%
Interest expense
   
            (19.6)
-9.4%
 
            (19.0)
-11.0%
 
           (61.7)
-10.2%
 
           (57.4)
-11.4%
Net interest margin
   
             28.4
13.6%
 
              14.8
8.6%
 
             74.9
12.4%
 
             40.0
8.0%
Provision for credit losses
   
              (9.5)
-4.6%
 
              (4.0)
-2.3%
 
           (22.0)
-3.7%
 
           (12.0)
-2.4%
Risk adjusted margin
   
             18.9
9.1%
 
              10.8
6.3%
 
             52.9
8.8%
 
             28.0
5.6%
Core operating expenses
   
            (16.2)
-7.8%
 
            (14.9)
-8.6%
 
           (48.3)
-8.0%
 
           (42.6)
-8.5%
Pre-tax income
   
               2.7
1.3%
 
              (4.0)
-2.3%
 
               4.6
0.8%
 
           (14.7)
-2.9%
                           
                           
                           
(1)  Includes allowance for finance credit losses and allowance for repossession inventory.
   
(2)  Wholesale auction liquidation amounts (net of expenses) for CPS portfolio as a percentage of the account balance at the time of sale.
(3)  As a percentage of the average managed portfolio.