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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