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 17, 2018

 

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

 

CALIFORNIA   1-14116   33-0459135

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

  

3800 Howard Hughes Parkway, Suite 1400, Las Vegas, NV 89169
(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))

 

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company   ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

 

 

 

   
 

 

Item 2.02 Results of Operations and Financial Condition.

 

On October 17, 2018, the registrant announced its earnings for the quarter ended September 30, 2018. A copy of the announcement is attached as an exhibit to this report. The registrant will hold a conference call on Thursday, October 18, 2018, 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. The conference identification number is 7899309.

 

Item 9.01. Financial Statements and Exhibits.

 

One exhibit is included with this report:

 

99.1 News release re earnings.
   

 

 

 

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 17, 2018   By:  /s/ JEFFREY P. FRITZ  
   

Jeffrey P. Fritz

Executive Vice President and Chief Financial Officer

Signing on behalf of the registrant

 

 

 

Exhibit 99.1

 

 

NEWS RELEASE

 

 

CPS ANNOUNCES THIRD QUARTER 2018 EARNINGS

 

§Pretax income of $4.7 million
§Net income of $3.2 million, or $0.13 per diluted share
§New contract purchases of $225 million

 

LAS VEGAS, NV, October 17, 2018 (GlobeNewswire) -- Consumer Portfolio Services, Inc. (Nasdaq: CPSS) (“CPS” or the “Company”) today announced earnings of $3.2 million, or $0.13 per diluted share, for its third quarter ended September 30, 2018. This compares to net income of $4.7 million, or $0.17 per diluted share, in the third quarter of 2017.

 

Revenues for the third quarter of 2018 were $95.6 million, a decrease of $13.9 million, or 12.7%, compared to $109.5 million for the third quarter of 2017. Total operating expenses for the third quarter of 2018 were $90.9 million compared to $101.4 million for the 2017 period. Pretax income for the third quarter of 2018 was $4.7 million compared to pretax income of $8.1 million in the third quarter of 2017, a decrease of 42.0%.

 

For the nine months ended September 30, 2018 total revenues were $298.6 million compared to $327.2 million for the nine months ended September 30, 2017, a decrease of approximately $28.6 million, or 8.7%. Total expenses for the nine months ended September 30, 2018 were $284.6 million, a decrease of $18.7 million, or 6.2%, compared to $303.3 million for the nine months ended September 30, 2017. Pretax income for the nine months ended September 30, 2018 was $13.9 million, compared to $23.9 million for the nine months ended September 30, 2017. Net income for the nine months ended September 30, 2018 was $9.5 million compared to $13.7 million for the nine months ended September 30, 2017.

 

During the third quarter of 2018, CPS purchased $225.2 million of new contracts compared to $214.7 million during the second quarter of 2018 and $204.7 million during the third quarter of 2017. The Company's receivables totaled $2.343 billion as of September 30, 2018, an increase from $2.329 billion as of June 30, 2018 and a decrease from $2.346 billion as of September 30, 2017.

 

Annualized net charge-offs for the third quarter of 2018 were 8.03% of the average portfolio as compared to 7.96% for the third quarter of 2017. Delinquencies greater than 30 days (including repossession inventory) were 11.58% of the total portfolio as of September 30, 2018, as compared to 10.27% as of September 30, 2017.

 

We are pleased to record our 28th consecutive quarter of pre-tax earnings,” said Charles E. Bradley, Jr. “In addition, in July we priced our third quarter securitization at the second-tightest spreads over the benchmarks since 2011, indicating continued high demand for our securitization bonds.”

 

Conference Call

 

CPS announced that it will hold a conference call on Thursday, October 18, 2018, 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. The conference identification number is 7899309.

 

 

 

 1 

 

 

A replay of the conference call will be available between October 18, 2018 and October 25, 2018, beginning two hours after conclusion of the call, by dialing 855 859-2056 or 404 537-3406 for international participants, with conference identification number 7899309. 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

 

 

 

 

 

 

 

 2 

 

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, 
   2018   2017   2018   2017 
Revenues:                
Interest income  $93,617   $107,014   $291,535   $319,074 
Other income   2,014    2,474    7,022    8,084 
    95,631    109,488    298,557    327,158 
Expenses:                    
Employee costs   18,806    18,455    59,288    53,807 
General and administrative   7,784    6,355    22,730    20,096 
Interest   25,808    23,317    75,057    68,641 
Provision for credit losses   31,959    47,336    107,997    143,053 
Other expenses   6,568    5,916    19,566    17,707 
    90,925    101,379    284,638    303,304 
Income before income taxes   4,706    8,109    13,919    23,854 
Income tax expense   1,508    3,446    4,409    10,138 
Net income  $3,198   $4,663   $9,510   $13,716 
                     
Earnings per share:                    
Basic  $0.14   $0.21   $0.44   $0.60 
Diluted  $0.13   $0.17   $0.38   $0.50 
                     
                     
Number of shares used in computing earnings per share:                    
Basic   22,636    22,473    21,800    23,019 
Diluted   24,735    26,779    25,178    27,606 

 

 

 

 3 

 

 

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

   September 30,   December 31, 
   2018   2017 
Assets:          
Cash and cash equivalents  $10,537   $12,731 
Restricted cash and equivalents   110,473    111,965 
Total cash and cash equivalents   121,010    124,696 
           
Finance receivables   1,697,841    2,304,984 
Allowance for finance credit losses   (82,472)   (109,187)
Finance receivables, net   1,615,369    2,195,797 
           
Finance receivables measured at fair value   614,807     
Deferred tax assets, net   28,686    32,446 
Other assets   63,698    71,902 
   $2,443,570   $2,424,841 
           
Liabilities and Shareholders' Equity:          
Accounts payable and accrued expenses  $33,324   $28,715 
Warehouse lines of credit   127,695    112,408 
Residual interest financing   39,013     
Securitization trust debt   2,034,281    2,083,215 
Subordinated renewable notes   16,948    16,566 
    2,251,261    2,240,904 
           
Shareholders' equity   192,309    183,937 
   $2,443,570   $2,424,841 

 

 

 

 4 

 

 

Operating and Performance Data ($ in millions) 

 

   At and for the   At and for the 
   Three months ended   Nine months ended 
   September 30,   September 30, 
   2018   2017   2018   2017 
                 
Contracts purchased  $225.24   $204.74   $650.58   $668.28 
Contracts securitized   239.87    230.00    638.45    670.00 
                     
Total portfolio balance  $2,342.89   $2,346.00   $2,342.89   $2,346.00 
Average portfolio balance   2,334.90    2,344.96    2,332.26    2,332.33 
                     
Allowance for finance credit losses as % of fin. receivables   4.86%    4.69%           
                     
Aggregate allowance as % of fin. receivables (1)   6.11%    5.59%           
                     
Delinquencies                    
31+ Days   10.13%    8.90%           
Repossession Inventory   1.45%    1.37%           
Total Delinquencies and Repo. Inventory   11.58%    10.27%           
                     
Annualized net charge-offs as % of average portfolio   8.03%    7.96%    7.92%    7.83% 
                     
Recovery rates (2)   34.8%    34.6%    34.5%    35.2% 

 

 

   For the   For the 
   Three months ended   Nine months ended 
   September 30,   September 30, 
   2018   2017   2018   2017 
   $ (3)   % (4)   $ (3)   % (4)   $ (3)   % (4)   $ (3)   % (4) 
Interest income  $93.62    16.0%   $107.01    18.3%   $291.54    16.7%   $319.07    18.2% 
Servicing fees and other income   2.01    0.3%    2.47    0.4%    7.02    0.4%    8.08    0.5% 
Interest expense   (25.81)   -4.4%    (23.32)   -4.0%    (75.06)   -4.3%    (68.64)   -3.9% 
Net interest margin   69.82    12.0%    86.17    14.7%    223.50    12.8%    258.52    14.8% 
Provision for credit losses   (31.96)   -5.5%    (47.34)   -8.1%    (108.00)   -6.2%    (143.05)   -8.2% 
Risk adjusted margin   37.86    6.5%    38.84    6.6%    115.50    6.6%    115.46    6.6% 
Core operating expenses   (33.16)   -5.7%    (30.73)   -5.2%    (101.58)   -5.8%    (91.61)   -5.2% 
Pre-tax income  $4.71    0.8%   $8.11    1.4%   $13.92    0.8%   $23.85    1.4% 

 

(1) Includes allowance for finance credit losses and allowance for repossession inventory.
(2) Wholesale auction liquidation amounts (net of expenses) 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 portfolio balance.  Percentages may not add due to rounding.

 

 

 

 

 

 5