cpss8k_dtd140408.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) April 8, 2014

 
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 April 8, 2014, the registrant announced its earnings for the year ended December 31, 2013.  A copy of the announcement is attached as an exhibit to this report.
 
The registrant will host a conference call on Wednesday, April 9, 2014,, 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 April 9, 2014 and April 16, 2014, beginning two hours after conclusion of the call, by dialing 855 859-2056 (or 404 537-3406 for international participants), with conference identification number 25558910. A broadcast of the conference call will also be available live and for 90 days after the call via the Company’s web site atwww.consumerportfolio.com.
 
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
 
         (c) Exhibits.
 
99.1   News Release dated April 8, 2014.


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: April 8, 2014
By: /s/ JEFFREY P. FRITZ
 
 
Jeffrey P. Fritz
Senior Vice President and Chief Financial Officer
Signing on behalf of the registrant

 

 













 
 
 

 

cpss8kexh991_dtd140408.htm
 
   
 
 
 
 
 
 
NEWS RELEASE
     
                                                                                             
CPS ANNOUNCES FIRST QUARTER 2014 EARNINGS

§  
Pretax income of $11.8 million
§  
Net income of $6.7 million, or $0.21  per diluted share
§  
New contract purchases of $190 million
§  
Total managed portfolio increases to $1.295 billion from $1.231 billion at December 31, 2013
§  
Senior secured debt of $37.8 million repaid in full during the quarter.
 
 
IRVINE, California, April 8, 2014 (GlobeNewswire) -- Consumer Portfolio Services, Inc. (Nasdaq: CPSS) (“CPS” or the “Company”) today announced earnings of $6.7 million, or $0.21 per diluted share, for its first quarter ended March 31, 2014.  This compares to net income of $3.8 million, or $0.12 per diluted share, in the first quarter of 2013.  This represents a 75% increase in earnings per share.

Revenues for the first quarter of 2014 were $68.1 million, an increase of $13.5 million, or 24.8%, compared to $54.6 million for the first quarter of 2013.  Total operating expenses for the first quarter of 2014 were $56.4 million, an increase of $8.3 million, or 17.3%, compared to $48.1 million for the 2013 period.  Pretax income for the first quarter of 2014 was $11.8 million compared to pretax income of $6.5 million in the first quarter of 2013, an increase of 80%.

During the first quarter of 2014, CPS purchased $189.9 million of new contracts compared to $173.4 million during the fourth quarter of 2013 and $180.1 million during the first quarter of 2014.  The Company's managed receivables totaled $1.295 billion as of March 31, 2014, an increase from $1.231 billion as of December 31, 2013 and $968.5 million as of March 31, 2013, as follows ($ in millions):

Originating Entity
March 31, 2014
December 31, 2013
March 31, 2013
CPS
$1,282.6
$1,211.7
$917.0
Fireside Bank
9.1
14.8
43.3
As Third Party Servicer
3.5
4.9
8.2
     Total
$1,295.2
$1,231.4
$968.5

Annualized net charge-offs for the first quarter of 2014 were 5.54% of the average owned portfolio as compared to 4.23% for the first quarter of 2013.  Delinquencies greater than 30 days (including repossession inventory) were 6.33% of the total owned portfolio as of March 31, 2014, as compared to 4.16% as of March 31, 2013.

As previously reported, during March CPS closed its first term securitization transaction of 2014 and the 12th transaction since April 2011. In the senior subordinate structure, a special purpose subsidiary sold five tranches of asset-backed notes totaling $180.0 million.  The notes are secured by automobile receivables purchased by CPS and have a weighted average effective coupon of approximately 2.51%. 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 5.00% of the then-outstanding receivable pool balance.

"The first quarter of 2014 was a good start to the year for us," said Charles E. Bradley, Jr., Chairman and Chief Executive Officer.  “We experienced a nice increase in our new contract purchases over the fourth quarter of 2013 and achieved continued earnings growth.  In addition, we hit a milestone in one of our corporate objectives by fully repaying our senior, secured corporate debt.  This demonstrates our continued diligence in deleveraging our balance sheet.   As we have discussed in the past, we feel this will position us well to navigate a wide variety of operating landscapes.”

Conference Call

CPS announced that it will hold a conference call on Wednesday, April 9, 2014, 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 April 9, 2014 and April 16, 2014, beginning two hours after conclusion of the call, by dialing 855 859-2056 or 404 537-3406 for international participants, with conference identification number 25558910.  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
949 753-6800



 
 

 

Consumer Portfolio Services, Inc. and Subsidiaries
 
Condensed Consolidated Statements of Operations
 
(In thousands, except per share data)
 
(Unaudited)
 
             
   
Three months ended
 
   
March 31,
 
   
2014
   
2013
 
Revenues:
           
Interest income
  $ 64,996     $ 51,168  
Servicing fees
    513       909  
Other income
    2,637       2,517  
      68,146       54,594  
Expenses:
               
Employee costs
    10,890       8,949  
General and administrative
    3,603       3,755  
Interest
    13,381       16,346  
Provision for credit losses
    23,880       15,147  
Other expenses
    4,628       3,869  
      56,382       48,066  
Income before income taxes
    11,764       6,528  
Income tax expense
    5,059       2,743  
      Net income
  $ 6,705     $ 3,785  
                 
Earnings per share:
               
     Basic
  $ 0.28     $ 0.19  
     Diluted
  $ 0.21     $ 0.12  
                 
                 
Number of shares used in computing earnings
         
   per share:
               
     Basic
    24,355       20,073  
     Diluted
    32,011       31,624  
                 
                 
Condensed Consolidated Balance Sheets
 
(In thousands)
 
(Unaudited)
 
                 
                 
   
March 31,
 
December 31,
 
      2014       2013  
Assets:
               
Cash and cash equivalents
  $ 14,567     $ 22,112  
Restricted cash and equivalents
    147,596       132,284  
Total cash and cash equivalents
    162,163       154,396  
                 
Finance receivables
    1,226,769       1,155,063  
Allowance for finance credit losses
    (44,652 )     (39,626 )
Finance receivables, net
    1,182,117       1,115,437  
                 
Finance receivables measured at fair value
    9,058       14,476  
Residual interest in securitizations
    445       854  
Deferred tax assets, net
    54,156       59,215  
Other assets
    52,010       51,988  
    $ 1,459,949     $ 1,396,366  
                 
Liabilities and Shareholders' Equity:
               
Accounts payable and accrued expenses
  $ 24,865     $ 24,839  
Warehouse lines of credit
    41,527       9,452  
Residual interest financing
    15,582       19,096  
Debt secured by receivables measured at fair value
    8,576       13,117  
Securitization trust debt
    1,247,380       1,177,559  
Senior secured debt, related party
    --       38,559  
Subordinated renewable notes
    18,585       19,142  
      1,356,515       1,301,764  
                 
Shareholders' equity
    103,434       94,602  
    $ 1,459,949     $ 1,396,366  
                 

 
 

 


 
 

 

Operating and Performance Data ($ in millions)
                   
                         
                         
                         
   
At and for the
       
   
Three months ended
       
   
March 31,
       
   
2014
         
2013
       
                         
Contracts purchased
  $ 189.89           $ 180.12        
Contracts securitized
    174.58             161.25        
                             
Total managed portfolio
  $ 1,295.23           $ 968.54        
Average managed portfolio
    1,274.80             944.05        
                             
Allowance for finance credit losses as % of fin. receivables
    3.64 %           2.90 %      
                             
Aggregate allowance as % of fin. receivables (1)
    4.85 %           3.68 %      
                             
Delinquencies
                           
31+ Days
    4.16 %           2.59 %      
Repossession Inventory
    2.18 %           1.57 %      
Total Delinquencies and Repo. Inventory
    6.33 %           4.16 %      
                             
Annualized net charge-offs as % of average owned portfolio
    5.54 %           4.23 %      
                             
Recovery rates (2)
    48.1 %           49.0 %      
                             
   
For the
   
Three months ended
   
March 31,
      2014     2013
      $(3)       %(4)       $(3)       %(4)  
Interest income
  $ 65.00       20.4 %   $ 51.17       21.7 %
Servicing fees and other income
    3.15       1.0 %     3.43       1.5 %
Interest expense
    (13.38 )     -4.2 %     (16.35 )     -6.9 %
Net interest margin
    54.77       17.2 %     38.25       16.2 %
Provision for credit losses
    (23.88 )     -7.5 %     (15.15 )     -6.4 %
Risk adjusted margin
    30.89       9.7 %     23.10       9.8 %
Core operating expenses
    (19.12 )     -6.0 %     (16.57 )     -7.0 %
Pre-tax income
  $ 11.76       3.7 %   $ 6.53       2.8 %
                                 
                                 
                                 
(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.