CPS Announces Fourth Quarter 2013 Earnings

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| Source: Consumer Portfolio Services, Inc.
  • Pretax income of $11.5 million
  • Net income of $6.5 million, or $0.21 per diluted share
  • New contract purchases of $173 million
  • Total managed portfolio increases to $1.231 billion from $1.167 billion at September 30, 2013

IRVINE, Calif., Feb. 10, 2014 (GLOBE NEWSWIRE) -- Consumer Portfolio Services, Inc. (Nasdaq:CPSS) ("CPS" or the "Company") today announced earnings of $6.5 million, or $0.21 per diluted share, for its fourth quarter ended December 31, 2013. This compares to net income of $64.8 million, or $2.20 per diluted share, in the fourth quarter of 2012. The 2012 period includes an income tax benefit of $60.2 million, or $2.04 per diluted share, related to the reversal of a valuation allowance against the Company's deferred tax asset net of current period income tax expense. Earnings for 2013 were $21.0 million, or $0.67 per diluted share, as compared to earnings of $69.4 million, or $2.72 per diluted share, for 2012. The 2012 period includes an income tax benefit of $60.2 million, or $2.36 per diluted share, related to the reversal of a valuation allowance against the Company's deferred tax asset net of current period income tax expense.

Revenues for the fourth quarter of 2013 were $66.6 million, an increase of $16.0 million, or 32%, compared to $50.6 million for the fourth quarter of 2012. Total operating expenses for the fourth quarter of 2013 were $55.1 million, an increase of $9.1 million, or 20%, compared to $46.0 million for the 2012 period. Pretax income for the fourth quarter of 2013 was $11.5 million compared to pretax income of $4.6 million in the fourth quarter of 2012, an increase of 150%. 

For the year ended December 31, 2013 total revenues were $255.8 million compared to $187.2 million for the year ended December 31, 2012, an increase of approximately $68.6 million, or 37%. Total expenses for the year ended December 31, 2013 were $218.6 million, an increase of $40.6 million, or 23%, compared to $178.0 million for the year ended December 31, 2012. Pretax income for the year ended December 31, 2013 was $37.2 million, compared to $9.2 million for the year ended December 31, 2012.

During the fourth quarter of 2013, CPS purchased $173.4 million of new contracts compared to $206.8 million during the third quarter of 2013 and $150.8 million during the fourth quarter of 2012. The Company's managed receivables totaled $1.231 billion as of December 31, 2013, an increase from $1.167 billion as of September 30, 2013 and $897.6 million as of December 31, 2012, as follows ($ in millions):

Originating Entity December 31, 2013 September 30, 2013 December 31, 2012
CPS $1,213.8 $1,141.1 $825.0
Fireside Bank 14.8 21.7 60.8
TFC -- -- 0.2
As Third Party Servicer 2.8 4.1 11.6
Total $1,231.4 $1,166.9 $897.6

Annualized net charge-offs for 2013 were 4.73% of the average owned portfolio as compared to 3.61% for 2012. Delinquencies greater than 30 days (including repossession inventory) were 6.87% of the total owned portfolio as of December 31, 2013, as compared to 5.55% as of December 31, 2012.

As previously reported, during December CPS closed its fourth term securitization transaction of 2013 and the 11th transaction since April 2011. In the senior subordinate structure, a special purpose subsidiary sold five tranches of asset-backed notes totaling $183.0 million. The notes are secured by automobile receivables purchased by CPS and have a weighted average effective coupon of approximately 2.89%. 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.

"2013 was another very good year for CPS," said Charles E. Bradley, Jr., Chairman and Chief Executive Officer. "In addition to record pre-tax profits, our new contract purchases grew 38% year-over-year and our total managed portfolio surpassed $1.2 billion for the first time since 2010. The fourth quarter of 2013 marked our ninth consecutive quarter of improving pre-tax income."

"We also made significant progress on several strategic objectives in 2013 to strengthen our balance sheet. First, we amended our revolving credit facilities to include multi-year revolving periods and amortization periods thereafter. In addition, we began the deleveraging process of repaying our residual and corporate debt, which we expect to nearly complete by the end of this year. These moves should enhance our operating and financial stability across a variety of capital markets environments."

Conference Call

CPS announced that it will hold a conference call on Tuesday, February 11, 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 February 11, 2014 and February 18, 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 59435721. 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.

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, 
  2013 2012 2013 2012
Revenues:        
Interest income  $ 63,904  $ 48,104  $ 231,330  $ 175,314
Servicing fees  609  408  3,093  2,305
Other income  2,121  2,108  10,405  9,589
Gain on cancellation of debt  --   --  10,947  --
   66,634  50,620  255,775  187,208
Expenses:        
Employee costs  11,285 9,695  42,960  35,573
General and administrative  3,999  3,664  16,345  15,429
Interest  13,379  17,726  58,179  79,422
Provision for credit losses  24,130  11,483  76,869  33,495
Provision for contingent liabilities  (1,809)  --  7,841  --
Other expenses  4,110  3,445  16,408  14,102
   55,094  46,013  218,602  178,021
Income before income taxes  11,540  4,607  37,173  9,187
Income tax expense  5,018  (60,221)  16,168  (60,221)
Net income   $ 6,522  $ 64,828  $ 21,005  $ 69,408
         
Earnings per share:        
Basic  $ 0.28  $ 3.30  $ 0.98  $ 3.56
Diluted  $ 0.21  $ 2.20  $ 0.67  $ 2.72
         
Pre-tax earnings per share:        
Basic  $ 0.50  $ 0.23  $ 1.73  $ 0.47
Diluted  $ 0.36  $ 0.16  $ 1.18  $ 0.36
         
Number of shares used in computing earnings per share:      
Basic 23,256  19,673 21,538  19,473
Diluted 31,629  29,527 31,574  25,478
 
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
     
  December 31, December 31,
  2013 2012
Assets:    
Cash and cash equivalents  $ 22,112  $ 12,966
Restricted cash and equivalents 132,284 104,445
Total cash and cash equivalents 154,396 117,411
     
Finance receivables 1,155,063 764,343
Allowance for finance credit losses (39,626) (19,594)
Finance receivables, net 1,115,437 744,749
     
Finance receivables measured at fair value 14,476 59,668
Residual interest in securitizations 854 4,824
Deferred tax assets, net 59,215 75,640
Other assets 51,988 35,328
   $ 1,396,366  $ 1,037,620
     
Liabilities and Shareholders' Equity:    
Accounts payable and accrued expenses  $ 24,839  $ 17,785
Warehouse lines of credit 9,452 21,731
Residual interest financing 19,096 13,773
Debt secured by receivables measured at fair value 13,117 57,107
Securitization trust debt 1,177,559 792,497
Senior secured debt, related party 38,559 50,135
Subordinated renewable notes 19,142 23,281
  1,301,764 976,309
     
Shareholders' equity 94,602 61,311
   $ 1,396,366  $ 1,037,620
 
Operating and Performance Data ($ in millions)
         
  At and for the  At and for the 
  Three months ended Twelve months ended
  December 31, December 31,
  2013 2012 2013 2012
         
Contracts purchased $ 173.41  $150.83  $ 764.09  $ 551.74
Contracts securitized  185.37  156.70  759.59  594.60
         
Total managed portfolio $ 1,231.42 $ 897.58 $ 1,231.42 $ 897.58
Average managed portfolio  1,214.55  880.47  1,081.94  822.57
         
Allowance for finance credit losses as % of fin. receivables 3.43% 2.56%    
         
Aggregate allowance as % of fin. receivables (1) 4.61% 3.35%    
         
Delinquencies        
31+ Days 4.82% 4.06%    
Repossession Inventory 2.05% 1.49%    
Total Delinquencies and Repo. Inventory 6.87% 5.55%    
         
Annualized net charge-offs as % of average owned portfolio 5.57% 3.99% 4.73% 3.61%
         
Recovery rates (2) 45.4% 46.8% 47.0% 47.9%
     
   For the   For the 
   Three months ended   Twelve months ended 
   December 31,   December 31, 
  2013 2012 2013 2012
  $ (3) % (4) $ (3) % (4) $ (3) % (4) $ (3) % (4)
Interest income  $ 63.90 21.0%  $ 48.10 21.9%  $ 231.33 21.4%  $ 175.31 21.3%
Servicing fees and other income  2.73 0.9%  2.52 1.1%  13.50 1.2%  11.89 1.4%
Interest expense  (13.38) -4.4%  (17.73) -8.1%  (58.18) -5.4%  (79.42) -9.7%
Net interest margin   53.26 17.5%  32.89 14.9%  186.65 17.3%  107.79 13.1%
Provision for credit losses  (24.13) -7.9%  (11.48) -5.2%  (76.87) -7.1%  (33.50) -4.1%
Risk adjusted margin  29.13 9.6%  21.41 9.7%  109.78 10.1%  74.29 9.0%
Core operating expenses  (19.39) -6.4%  (16.80) -7.6%  (75.71) -7.0%  (65.10) -7.9%
Provision for contingent liabilities  1.81 0.6%  --  0.0%  (7.84) -0.7%  --  0.0%
Gain on cancellation of debt  --  0.0%  --  0.0%  10.95 1.0%  --  0.0%
Pre-tax income  $ 11.54 3.8%  $ 4.61 2.1%  $ 37.17 3.4%  $ 9.19 1.1%
                 
(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.
Investor Relations Contact

Robert E. Riedl, Chief Investment Officer
949 753-6800