EX-99.1 2 cpss8kexh_dtd141014.htm cpss8kexh_dtd141014.htm
 
 
 
 
 
 
NEWS RELEASE
                                                                                     
 
 
CPS ANNOUNCES THIRD QUARTER 2014 EARNINGS

§  
Pretax income of $13.8 million
§  
Net income of $7.8 million, or $0.24  per diluted share
§  
New contract purchases of $279 million
§  
Total managed portfolio increases to $1.519 billion from $1.374 billion at June 30, 2014
§  
Renews $100 million revolving credit agreement

 
 
IRVINE, California, October 14, 2014 (GlobeNewswire) -- Consumer Portfolio Services, Inc. (Nasdaq: CPSS) (“CPS” or the “Company”) today announced earnings of $7.8 million, or $0.24 per diluted share, for its third quarter ended September 30, 2014.  This compares to net income of $5.9 million, or $0.19 per diluted share, in the third quarter of 2013, representing a 26% increase in earnings per diluted share.  Earnings for the first nine months of 2014 were $21.5 million, or $0.67 per diluted share, as compared to earnings of $14.5 million, or $0.46 per diluted share, for the same period in 2013.

Revenues for the third quarter of 2014 were $77.1 million, an increase of $13.0 million, or 20.3%, compared to $64.1 million for the third quarter of 2013.  Total operating expenses for the third quarter of 2014 were $63.2 million, an increase of $9.7 million, or 18.2%, compared to $53.5 million for the 2013 period.  Pretax income for the third quarter of 2014 was $13.8 million compared to pretax income of $10.6 million in the third quarter of 2013, an increase of 30.7%.

For the nine months ended September 30, 2014 total revenues were $216.8 million compared to $189.1 million for the nine months ended September 30, 2013.   However, in the 2013 period, revenues included $10.9 million from a gain on cancellation of debt.   Excluding that gain, revenues for the nine months ended September 30, 2014 increased $38.6 million, or 21.7%, over the prior year. Total expenses for the nine months ended September 30, 2014 were $178.9 million, an increase of $15.4 million compared to $163.5 million for the nine months ended September 30, 2013.  However, in the 2013 period, operating expenses included a provision for contingent liabilities of $9.7 million.  Excluding the provision for contingent liabilities, operating expenses for the nine months ended September 30, 2014 increased $25.0 million, or 16.3%, compared to the prior year period.   Pretax income for the nine months ended September 30, 2014 was $37.9 million, compared to $25.6 million for the nine months ended September 30, 2013.

During the third quarter of 2014, CPS purchased $279.3 million of new contracts compared to $211.4 million during the second quarter of 2014 and $206.8 million during the third quarter of 2013.  The Company's managed receivables totaled $1.519 billion as of September 30, 2014, an increase from $1.374 billion as of June 30, 2014 and $1.167 billion as of September 30, 2013, as follows ($ in millions):


 
1
 

Originating Entity
September 30, 2014
June 30, 2014
September 30, 2013
CPS
$1,514.6
$1,366.6
$1,141.1
Fireside Bank
3.2
5.7
21.7
As Third Party Servicer
0.8
1.3
4.1
     Total
$1,518.6
$1,373.6
$1,166.9

Annualized net charge-offs for the third quarter of 2014 were 6.18% of the average owned portfolio as compared to 4.89% for the third quarter of 2013.  Delinquencies greater than 30 days (including repossession inventory) were 6.66% of the total owned portfolio as of September 30, 2014, as compared to 6.44% as of September 30, 2013.

As previously reported, during September CPS closed its third term securitization transaction of 2014 and the 14th transaction since April 2011. In the senior subordinate structure, a special purpose subsidiary sold five tranches of asset-backed notes totaling $273.0 million.  The notes are secured by automobile receivables purchased by CPS and have a weighted average effective coupon of approximately 2.71%. 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 second consecutive senior subordinate securitization to receive a triple "A" rating on the senior class of notes.

"We are pleased with our operating results for the third quarter of 2014," said Charles E. Bradley, Jr., Chairman and Chief Executive Officer.  “We significantly increased our new contract purchases and managed portfolio, and recorded our 12th consecutive quarter of earnings growth.  During the quarter we also completed an early renewal of our $100 million revolving credit agreement with Citibank, extending the revolving period of that facility to August 2015.”

Conference Call

CPS announced that it will hold a conference call on Wednesday October 15, 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 October 15, 2014 and October 22, 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 19927879.  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,
  
     
2014
    
2013
    
2014
    
2013
  
Revenues:
                          
Interest income
   $
73,865
   $ 
60,462
   $
207,082
   $ 
 167,426
  
Servicing fees
    
               278
    
               700
    
            1,158
    
            2,484
  
Other income
    
            2,907
    
            2,904
    
            8,550
    
            8,284
  
Gain on cancellation of debt
    
                  -
    
                  -
    
                  -
    
         10,947
  
     
         77,050
    
         64,066
    
       216,790
    
       189,141
  
Expenses:
                          
Employee costs
    
         12,733
    
         11,199
    
         35,397
    
         31,675
  
General and administrative
    
            5,804
    
            4,074
    
         14,482
    
         12,346
  
Interest
    
         12,239
    
         13,853
    
         37,562
    
         44,800
  
Provision for credit losses
    
         27,287
    
         20,220
    
         76,795
    
         52,739
  
Provision for contingent liabilities
    
                  -
    
                  -
    
                  -
    
            9,650
  
Other expenses
    
            5,183
    
            4,161
    
         14,658
    
         12,298
  
     
         63,246
    
         53,507
    
       178,894
    
       163,508
  
Income before income taxes
    
         13,804
    
         10,559
    
         37,896
    
         25,633
  
Income tax expense
    
            6,028
    
            4,686
    
         16,390
    
         11,150
  
      Net income
   $
7,776
   $ 
5,873
   $
21,506
   $ 
 14,483
  
                           
Earnings per share:
                          
     Basic
   $
0.31
   $ 
0.27
   $
0.86
   $ 
 0.69
  
     Diluted
   $
0.24
   $ 
0.19
   $
0.67
   $ 
 0.46
  
                           
                           
Number of shares used in computing earnings
                    
   per share:
                          
     Basic
    
25,290
    
21,795
    
24,895
    
20,959
  
     Diluted
    
32,040
    
31,217
    
32,021
    
31,550
  
                           
                           
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
                           
                           
     
September 30,
  
December 31,
              
     
2014
 
  
2013
              
Assets:
                          
Cash and cash equivalents
   $
13,136
   $ 
       22,112
              
Restricted cash and equivalents
    
174,634
    
132,284
              
Total cash and cash equivalents
    
187,770
    
154,396
              
                           
Finance receivables
    
1,462,430
    
1,155,063
              
Allowance for finance credit losses
    
(54,621)
    
(39,626)
              
Finance receivables, net
    
1,407,809
    
1,115,437
              
                           
Finance receivables measured at fair value
  
3,202
    
14,476
              
Residual interest in securitizations
    
135
    
854
              
Deferred tax assets, net
    
46,587
    
59,215
              
Other assets
    
59,413
    
51,988
              
    $
1,704,916
   $ 
 1,396,366
              
                           
Liabilities and Shareholders' Equity:
                          
Accounts payable and accrued expenses
   $
22,873
   $ 
       24,839
              
Warehouse lines of credit
    
59,442
    
9,452
              
Residual interest financing
    
12,767
    
19,096
              
Debt secured by receivables measured at fair value
3,170
    
13,117
              
Securitization trust debt
    
1,469,670
    
1,177,559
              
Senior secured debt, related party
    
--
    
38,559
              
Subordinated renewable notes
    
15,493
    
19,142
              
     
1,583,415
    
1,301,764
              
                           
Shareholders' equity
    
121,501
    
94,602
              
    $
1,704,916
   $ 
1,396,366
              
                           
                           
                           
                           
                           
Operating and Performance Data ($ in millions)
                    
                           
                           
                           
     
At and for the
    
At and for the
  
     
Three months ended
    
Nine months ended
  
     
September 30,
        
September 30,
      
     
2014
    
2013
    
2014
    
2013
  
                           
Contracts purchased
   $
279.30
   $ 
 206.77
   $
680.57
    $
 590.67
  
Contracts securitized
    
         256.34
    
         203.32
    
         631.14
    
         574.22
  
                           
Total managed portfolio
   $
1,518.66
   $ 
 1,166.87
   $
1,518.66
    $
 1,166.87
  
Average managed portfolio
    
      1,468.19
    
      1,134.57
    
      1,362.15
    
      1,037.73
  
                           
Allowance for finance credit losses as % of fin. receivables
3.73%
    
3.19%
              
                           
Aggregate allowance as % of fin. receivables (1)
4.94%
    
4.21%
              
                           
Delinquencies
                          
31+ Days
    
4.59%
    
4.63%
              
Repossession Inventory
    
2.07%
    
1.81%
              
Total Delinquencies and Repo. Inventory
    
6.66%
    
6.44%
              
                           
Annualized net charge-offs as % of average owned portfolio
6.18%
    
4.89%
    
5.59%
    
4.21%
  
                           
Recovery rates (2)
    
44.6%
    
45.5%
    
47.3%
    
47.7%
  
                           

     
For the
 For the
     
Three months ended
 Nine months ended
     
September 30,
 September 30,
     
2014
2013
2014
2013
    $
(3)
% (4)
$ (3)
% (4)
$ (3)
% (4)
$ (3)
% (4)
Interest income
   $
73.87
20.1%
 $           60.46
21.3%
 $          207.08
20.3%
 $          167.43
21.5%
Servicing fees and other income
    
                3.19
0.9%
                3.60
1.3%
                9.71
1.0%
              10.77
1.4%
Interest expense
    
             (12.24)
-3.3%
             (13.85)
-4.9%
             (37.56)
-3.7%
             (44.80)
-5.8%
Net interest margin
    
              64.81
17.7%
              50.21
17.7%
            179.23
17.5%
            133.39
17.1%
Provision for credit losses
    
             (27.29)
-7.4%
             (20.22)
-7.1%
             (76.80)
-7.5%
             (52.74)
-6.8%
Risk adjusted margin
    
              37.52
10.2%
              29.99
10.6%
            102.43
10.0%
              80.66
10.4%
Core operating expenses
    
             (23.72)
-6.5%
             (19.43)
-6.9%
             (64.54)
-6.3%
             (56.32)
-7.2%
Provision for contingent liabilities
    
                   -
0.0%
                   -
0.0%
                   -
0.0%
              (9.65)
-1.2%
Gain on cancellation of debt
    
                   -
0.0%
                   -
0.0%
                   -
0.0%
              10.95
1.4%
Pre-tax income
   $
13.80
3.8%
 $           10.56
3.7%
 $           37.90
3.7%
 $           25.63
3.3%
                             
(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.