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) February 17, 2015

 

  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 February 17, 2015, the registrant announced its earnings for the year ended December 31, 2014.  A copy of the announcement is attached as an exhibit to this report.

 

As disclosed in the announcement, the registrant hosted a conference call on Wednesday, February 18, 2015, at 1:00 p.m. ET to discuss its results of operation and financial condition. A replay of the conference call will be available through February 25, 2015, by dialing 855 859-2056 (or 404 537-3406 for international participants), with conference identification number 87486533. A broadcast of the conference call will also be available for 90 days after the call via the Company’s web site at www.consumerportfolio.com.

 

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

 

(c) Exhibits.

 

99.1     News Release.

 

 

 

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: February 23, 2015 By: /s/ JEFFREY P. FRITZ  
 

Jeffrey P. Fritz

Executive Vice President and Chief Financial Officer

Signing on behalf of the registrant

 

 

 

 

 

 

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NEWS RELEASE

 

CPS ANNOUNCES FOURTH QUARTER 2014 EARNINGS

 

§Fourth quarter pretax income of $14.3 million
§Fourth quarter net income of $8.0 million, or $0.25 per diluted share
§Full year pretax income increased 40% to $52.2 million
§Full year net income increased 40% to $29.5 million, or $0.92 per diluted share
§New contract purchases of $264 million for the fourth quarter
§Total managed portfolio increases to $1.644 billion from $1.519 billion at September 30, 2014

 

 

IRVINE, California, February 18, 2015 (GlobeNewswire) -- Consumer Portfolio Services, Inc. (Nasdaq: CPSS) (“CPS” or the “Company”) today announced earnings of $8.0 million, or $0.25 per diluted share, for its fourth quarter ended December 31, 2014. This compares to net income of $6.5 million, or $0.21 per diluted share, in the fourth quarter of 2013, representing a 19% increase in earnings per diluted share. Earnings for 2014 were $29.5 million, or $0.92 per diluted share, as compared to earnings of $21.0 million, or $0.67 per diluted share, for 2013, representing a 37% increase in earnings per diluted share.

 

Revenues for the fourth quarter of 2014 were $83.5 million, an increase of $16.9 million, or 25.4%, compared to $66.6 million for the fourth quarter of 2013. Total operating expenses for the fourth quarter of 2014 were $69.1 million, an increase of $14.0 million, or 25.4%, compared to $55.1 million for the 2013 period. Pretax income for the fourth quarter of 2014 was $14.3 million compared to pretax income of $11.5 million in the fourth quarter of 2013, an increase of 24.4%.

 

For the year ended December 31, 2014 total revenues were $300.3 million compared to $255.8 million for the year ended December 31, 2013. However, in 2013, revenues included $10.9 million from a gain on cancellation of debt. Excluding that gain, revenues for the year ended December 31, 2014 increased $55.4 million, or 22.6%, over the prior year. Total expenses for the year ended December 31, 2014 were $248.0 million compared to $218.6 million for the year ended December 31, 2013. However, in 2013, operating expenses included a provision for contingent liabilities of $7.8 million. Excluding the provision for contingent liabilities, operating expenses for the year ended December 31, 2014 increased $37.2 million, or 17.7%, compared to the prior year period. Pretax income for the year ended December 31, 2014 was $52.2 million, compared to $37.2 million for the year ended December 31, 2013.

 

During the fourth quarter of 2014, CPS purchased $264.4 million of new contracts compared to $279.3 million during the third quarter of 2014 and $173.4 million during the fourth quarter of 2013. The Company's managed receivables totaled $1.644 billion as of December 31, 2014, an increase from $1.519 billion as of September 30, 2014 and $1.231 billion as of December 31, 2013, as follows ($ in millions):

 

Originating Entity  December 31, 2014  September 30, 2014  December 31, 2013
CPS  $1,641.8   $1,514.6   $1,213.8 
Fireside Bank   1.7    3.2    14.8 
As Third Party Servicer   0.4    0.8    2.8 
     Total  $1,643.9   $1,518.6   $1,231.4 

 

Annualized net charge-offs for the fourth quarter of 2014 were 6.44% of the average owned portfolio as compared to 5.57% for the fourth quarter of 2013. Delinquencies greater than 30 days (including repossession inventory) were 7.18% of the total owned portfolio as of December 31, 2014, as compared to 6.87% as of December 31, 2013.

 

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As previously reported, during December CPS closed its fourth term securitization transaction of 2014 and the 15th transaction since April 2011. In the senior subordinate structure, a special purpose subsidiary sold five tranches of asset-backed notes totaling $267.5 million. The notes are secured by automobile receivables purchased by CPS and have a weighted average effective coupon of approximately 3.07%. 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 4.00% of the then-outstanding receivable pool balance. The transaction was CPS's third consecutive senior subordinate securitization to receive a triple "A" rating on the senior class of notes.

 

"We are pleased to report another successful year in 2014,” said Charles E Bradley, Jr., Chairman and Chief Executive Officer. “In addition to record pre-tax earnings, our new contract purchases grew 24% compared to 2013 and our total managed portfolio grew 34% to over $1.6 billion.” “We recorded our 3rd consecutive year of earnings growth and continued our strategy of deleveraging our balance sheet by repaying over $49 million in residual and corporate debt without refinancing.”

 

Conference Call

 

CPS announced that it will hold a conference call on Wednesday February 18, 2015, 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 of the conference call will be available between February 18, 2015 and February 25, 2015 beginning two hours after conclusion of the call, by dialing 855 859-2056 or 404 537-3406 for international participants, with conference identification number 87486533. 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 incurred 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 the provision for credit losses may affect future performance.

 

Investor Relations Contact

 

Jeffrey P. Fritz, Chief Financial Officer

844 878-2777

 

 

 

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Consumer Portfolio Services, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)  

 

   Three months ended  Twelve months ended
   December 31,  December 31,
   2014  2013  2014  2013
Revenues:                    
Interest income  $79,652   $63,904   $286,734   $231,330 
Servicing fees   218    609    1,376    3,093 
Other income   3,597    2,121    12,146    10,405 
Gain on cancellation of debt   —      —      —      10,947 
    83,467    66,634    300,256    255,775 
Expenses:                    
Employee costs   14,732    11,285    50,129    42,960 
General and administrative   4,772    3,999    19,254    16,345 
Interest   12,833    13,379    50,395    58,179 
Provision for credit losses   31,433    24,130    108,228    76,869 
Provision for contingent liabilities   —      (1,809)   —      7,841 
Other expenses   5,351    4,110    20,008    16,408 
    69,121    55,094    248,014    218,602 
Income before income taxes   14,346    11,540    52,242    37,173 
Income tax expense   6,336    5,018    22,726    16,168 
      Net income  $8,010   $6,522   $29,516   $21,005 
                     
Earnings per share:                    
     Basic  $0.31   $0.28   $1.18   $0.98 
     Diluted  $0.25   $0.21   $0.92   $0.67 
                     
                     
Number of shares used in computing earnings per share:                    
     Basic   25,470    23,256    25,040    21,538 
     Diluted   32,060    31,629    32,032    31,574 

 

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Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

   December 31,  December 31,
   2014  2013
Assets:          
Cash and cash equivalents  $17,859   $22,112 
Restricted cash and equivalents   175,382    132,284 
Total cash and cash equivalents   193,241    154,396 
           
Finance receivables   1,595,956    1,155,063 
Allowance for finance credit losses   (61,460)   (39,626)
Finance receivables, net   1,534,496    1,115,437 
           
Finance receivables measured at fair value   1,664    14,476 
Residual interest in securitizations   68    854 
Deferred tax assets, net   42,847    59,215 
Other assets   60,742    51,988 
   $1,833,058   $1,396,366 
           
Liabilities and Shareholders' Equity:          
Accounts payable and accrued expenses  $21,660   $24,839 
Warehouse lines of credit   56,839    9,452 
Residual interest financing   12,327    19,096 
Debt secured by receivables measured at fair value   1,250    13,117 
Securitization trust debt   1,598,496    1,177,559 
Senior secured debt, related party   —      38,559 
Subordinated renewable notes   15,233    19,142 
    1,705,805    1,301,764 
           
Shareholders' equity   127,253    94,602 
   $1,833,058   $1,396,366 

 

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Operating and Performance Data ($ in millions)

 

   At and for the   At and for the 
   Three months ended   Twelve months ended 
   December 31,   December 31, 
   2014   2013   2014   2013 
                 
Contracts purchased  $264.37   $173.41   $944.94   $764.09 
Contracts securitized   269.93    185.37    901.07    759.59 
                     
Total managed portfolio  $1,643.92   $1,231.42   $1,643.92   $1,231.42 
Average managed portfolio   1,605.04    1,214.55    1,422.87    1,081.94 
                     
Allowance for finance credit losses as % of fin. receivables   3.85%    3.43%           
                     
Aggregate allowance as % of fin. receivables (1)   4.88%    4.61%           
                     
Delinquencies                    
31+ Days   5.46%    4.82%           
Repossession Inventory   1.72%    2.05%           
Total Delinquencies and Repo. Inventory   7.18%    6.87%           
                     
Annualized net charge-offs as % of average owned portfolio   6.44%    5.57%    5.83%    4.73% 
                     
Recovery rates (2)   42.7%    45.4%    46.0%    47.0% 

 

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   For the   For the 
   Three months ended   Twelve months ended 
   December 31,   December 31, 
   2014   2013   2014   2013 
   $ (3)   %(4)   $ (3)   %(4)   $ (3)   %(4)   $ (3)   %(4) 
Interest income  $79.65    19.9%   $63.90    21.0%   $286.73    20.2%   $231.33    21.4% 
Servicing fees and other income   3.82    1.0%    2.73    0.9%    13.52    1.0%    13.50    1.2% 
Interest expense   (12.83)   -3.2%    (13.38)   -4.4%    (50.40)   -3.5%    (58.18)   -5.4% 
Net interest margin   70.63    17.6%    53.26    17.5%    249.86    17.6%    186.65    17.3% 
Provision for credit losses   (31.43)   -7.8%    (24.13)   -7.9%    (108.23)   -7.6%    (76.87)   -7.1% 
Risk adjusted margin   39.20    9.8%    29.13    9.6%    141.63    10.0%    109.78    10.1% 
Core operating expenses   (24.86)   -6.2%    (19.39)   -6.4%    (89.39)   -6.3%    (75.71)   -7.0% 
Provision for contingent liabilities       0.0%    1.81    0.6%        0.0%    (7.84)   -0.7% 
Gain on cancellation of debt       0.0%        0.0%        0.0%    10.95    1.0% 
Pre-tax income  $14.35    3.6%   $11.54    3.8%   $52.24    3.7%   $37.17    3.4% 

 

(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)  Numbers may not add due to rounding.
(4)  Annualized percentage of the average managed portfolio.  Percentages may not add due to rounding.

 

 

 

 

 

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