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) July 17, 2007 CONSUMER PORTFOLIO SERVICES, INC. --------------------------------- (Exact Name of Registrant as Specified in Charter) CALIFORNIA 0-51027 33-0459135 ---------- --------- ---------- (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 16355 Laguna Canyon Road, Irvine, CA 92618 ------------------------------------------ (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): [ ] Written communications 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 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION. The information in this Item 2.02, and the related Exhibit 99.1, is being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended. On July 17, 2007, the registrant issued a news release announcing its earnings for the quarter ended June 30, 2007. A copy of the release is attached as Exhibit 99.1. The registrant also announced that it will hold its regular quarterly conference call on July 18, 2007, at 1:30 p.m. eastern time to discuss its quarterly earnings. Those wishing to participate by telephone may dial in at 973-582-2717 approximately 10 minutes prior to the scheduled time. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits. Exhibit Number Description -------------- ----------- 99.1 News Release dated July 17, 2007
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: July 18, 2007 By: /s/ Jeffrey P. Fritz -------------------------------------- Jeffrey P. Fritz Sr. Vice President and Chief Financial Officer Signing on behalf of the registrant and as principal financial officer
EXHIBIT INDEX Exhibit Number Description - -------------- ----------- 99.1 News Release dated July 17, 2007
EXHIBIT 99.1 [CPS LOGO] NEWS RELEASE - -------------------------------------------------------------------------------- CONSUMER PORTFOLIO SERVICES, INC. REPORTS 2007 SECOND QUARTER EARNINGS IRVINE, CALIFORNIA, JULY 17, 2007 (BUSINESS WIRE) -- Consumer Portfolio Services, Inc. (Nasdaq: CPSS) ("CPS" or the "Company") today announced earnings for its second quarter ended June 30, 2007. Pretax income for the second quarter of 2007 increased to $6.2 million, compared to pretax income of $2.6 million for the comparable quarter ended June 30, 2006. Net income for the quarter ended June 30, 2007 was $3.5 million, or $0.15 per diluted share, compared to net income of $2.6 million, or $0.11 per diluted share, for the quarter ended June 30, 2006. Net income for the second quarter of 2006 did not include a provision for income tax expense. For the three months ended June 30, 2007 total revenues increased approximately $28.6 million, or 42.6%, to $95.8 million, compared to $67.2 million for the three months ended June 30, 2006. Total expenses for the three months ended June 30, 2007 were $89.6 million, an increase of $25.0 million, or 38.7%, as compared to $64.6 million for the three months ended June 30, 2006. Pretax income for the six months ended June 30, 2007 increased to $11.6 million, compared to pretax income of $4.4 million for the six months ended June 30, 2006. Net income for the six months ended June 30, 2007 was $6.7 million, or $0.29 per diluted share, compared to net income of $4.4 million, or $0.18 per diluted share, for the six months ended June 30, 2006. Net income for the six months ended June 30, 2006 did not include a provision for income tax expense. For the six months ended June 30, 2007 total revenues increased approximately $57.0 million, or 45.5%, to $182.3 million, compared to $125.3 million for the six months ended June 30, 2006. Total expenses for the six months ended June 30, 2007 were $170.6 million, an increase of $49.8 million, or 41.2%, as compared to $120.8 million for the six months ended June 30, 2006. During the second quarter of 2007, CPS purchased $346.0 million of contracts from dealers as compared to $330.3 million during the first quarter of 2007 and $268.8 million during the second quarter of 2006. During the first half of 2007, CPS purchased $676.3 million of contracts from dealers as compared to $523.2 million during the first half of 2006. 2007 contract purchases represent an increase of 29.3% vs. the same period in 2006. The Company's managed receivables totaled $1,900.3 million as of June 30, 2007, an increase of $525.0 million, or 38.2%, from $1,375.3 million as of June 30, 2006, as follows ($ in millions): June 30, 2007 June 30, 2006 ------------- ------------- Owned by Consolidated Subsidiaries* $ 1,889.9 $ 1,299.4 Owned by Non-Consolidated Subsidiaries 9.1 67.2 As Third Party Servicer for SeaWest Financial 1.3 8.7 ---------- ---------- Total $ 1,900.3 $ 1,375.3 * Before $146.0 million and $107.7 million of allowance for credit losses, deferred acquisition fees and repossessed vehicles for 2007 and 2006, respectively. Page 1 of 6
CPS completed a term securitization in May of receivables primarily originated by CPS and by its subsidiary, The Finance Company, with the sale of $113.3 million of asset backed notes. This was in addition to its regular quarterly securitization program, with the June sale of $315.0 million of asset backed notes. As previously announced, the quarterly transaction was executed with lower credit enhancement requirements than the first quarter transaction. Both transactions were completed smoothly in an otherwise uncertain credit market. Subsequent to quarter end, the Company issued $60 million of two-year notes under a new $120 million revolving and term residual interest financing facility. Annualized net charge-offs during the first half of 2007 were 4.60% of the average owned portfolio as compared to 3.71% during the same period in 2006. Delinquencies greater than 30 days (including repossession inventory) were 4.85% of the total owned portfolio as of June 30, 2007 as compared to 3.87% as of June 30, 2006. "The second quarter marks our largest quarter of new contract originations in the history of the Company," said Charles E. Bradley, Jr., President and Chief Executive Officer. "The controlled growth strategy that we implemented in the first quarter of 2004 has proven successful as we have grown our total managed portfolio from $741 million at the end of 2003 to $1.9 billion at the end of the second quarter 2007." "With respect to the second quarter's financial results, our continued year-over-year pretax income growth validates our execution in growing our total managed portfolio and our ongoing efforts to improve operating efficiencies. Credit performance remains good and within the range of our expectations. In addition, the new residual interest financing facility we recently established provides significant liquidity and additional flexibility to our capital structure." CONFERENCE CALL CPS announced that it will hold a conference call tomorrow, July 18, 2007, at 1:30 p.m. ET to discuss its quarterly earnings. Those wishing to participate by telephone may dial-in at 973-582-2717 approximately 10 minutes prior to the scheduled time. A replay will be available between July 18, 2007 and July 25, 2007, beginning one hour after conclusion of the call, by dialing 877-519-4471 or 973-341-3080 for international participants, with pin number 8997332. A broadcast of the conference call will also be available live and for 30 days after the call via the Company's web site at www.consumerportfolio.com and at www.streetevents.com. ABOUT CONSUMER PORTFOLIO SERVICES, INC. Consumer Portfolio Services, Inc. is a specialty finance company engaged in purchasing and servicing new and used retail automobile contracts originated primarily by franchised automobile dealerships and to a lesser extent by select independent dealers of used automobiles in the United States. We serve as an alternative source of financing for dealers, facilitating sales to sub-prime customers, who have limited credit history, low income or past credit problems and who otherwise might not be able to obtain financing from traditional sources. 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 OR THE EFFECTS OF RECENT CHANGES IN BANKRUPTCY LAW, 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 EARNINGS, AS TO WHICH THERE CAN BE NO ASSURANCE. Page 2 of 6
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 Consumer Portfolio Services, Inc. 949-753-6800 Page 3 of 6
CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) Three months ended Six months ended June 30, June 30, ----------------------------- ----------------------------- 2007 2006 2007 2006 ------------ ------------ ------------ ------------ REVENUES: Interest income $ 89,448 $ 63,039 $ 169,938 $ 117,566 Servicing fees 113 799 395 1,804 Other income 6,239 3,395 11,961 5,887 ------------ ------------ ------------ ------------ 95,800 67,233 182,294 125,257 ------------ ------------ ------------ ------------ EXPENSES: Employee costs 11,335 9,720 22,139 19,077 General and administrative 6,082 5,678 12,051 10,789 Interest 33,714 22,303 63,218 40,338 Provision for credit losses 32,670 22,178 62,159 41,277 Other expenses 5,762 4,727 11,080 9,359 ------------ ------------ ------------ ------------ 89,563 64,606 170,647 120,840 ------------ ------------ ------------ ------------ Income before income taxes 6,237 2,627 11,647 4,417 Income taxes 2,749 -- 4,928 -- ------------ ------------ ------------ ------------ Net income $ 3,488 $ 2,627 $ 6,719 $ 4,417 ============ ============ ============ ============ Earnings per share: Basic $ 0.16 $ 0.12 $ 0.31 $ 0.20 Diluted 0.15 0.11 0.29 0.18 Number of shares used in computing earnings per share: Basic 21,539 21,839 21,533 21,786 Diluted 23,405 24,377 23,562 24,283 Page 4 of 6
CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (UNAUDITED) June 30, December 31, 2007 2006 ----------- ----------- Cash $ 13,437 $ 14,215 Restricted cash 260,979 193,001 ----------- ----------- Total Cash 274,416 207,216 Finance receivables 1,839,503 1,480,794 Allowance for finance credit losses (95,597) (79,380) ----------- ----------- Finance receivables, net 1,743,906 1,401,414 Residual interest in securitizations 5,449 13,795 Other assets 110,143 106,169 ----------- ----------- $ 2,133,914 $ 1,728,594 =========== =========== Accounts payable and other liabilities $ 36,956 $ 31,185 Warehouse lines of credit 79,722 72,950 Residual interest financing 27,874 31,378 Securitization trust debt 1,837,634 1,442,995 Senior secured debt 15,000 25,000 Subordinated debt 19,766 13,574 ----------- ----------- 2,016,952 1,617,082 ----------- ----------- Shareholders' equity 116,962 111,512 ----------- ----------- $ 2,133,914 $ 1,728,594 =========== =========== Page 5 of 6
OPERATING AND PERFORMANCE DATA ($ IN THOUSANDS) At and for the At and for the Three months ended Six months ended June 30, June 30, ---------------------------- --------------------------- 2007 2006 2007 2006 ---- ---- ---- ---- Contract purchases 346,030 268,770 676,302 523,231 Total managed portfolio 1,900,255 1,375,347 1,900,255 1,375,347 Average managed portfolio 1,843,346 1,327,766 1,754,618 1,259,449 Net interest margin (1) 55,734 40,736 106,720 77,228 Risk adjusted margin (2) 23,064 18,558 44,561 35,951 Core operating expenses (3) 23,179 20,125 45,270 39,225 Annualized % of average managed portfolio 5.03% 6.06% 5.16% 6.23% Annualized return on managed assets (4) 1.35% 0.79% 1.33% 0.70% Allowance as % of finance receivables 5.20% 5.91% Delinquencies 31+ Days 3.50% 2.86% Repossession Inventory 1.35% 1.01% Total Delinquencies and Repossession Inventory 4.85% 3.87% Annualized net charge-offs as % of average owned portfolio 4.13% 2.78% 4.60% 3.71% (1) Interest income less interest expense. (2) Net interest margin less provision for credit losses. (3) Total expenses less interest and provision for credit losses. (4) Pretax income divided by average managed portfolio. Page 6 of 6