 | NEWS RELEASE |
CPS ANNOUNCES SECOND QUARTER 2014 EARNINGS
| § | Pretax income of $12.3 million |
| § | Net income of $7.0 million, or $0.22 per diluted share |
| § | New contract purchases of $211 million |
| § | Total managed portfolio increases to $1.374 billion from $1.295 billion at March 31, 2014 |
| § | Second quarter ABS earns triple “A” rating. |
IRVINE, California, July 21, 2014 (GlobeNewswire) -- Consumer Portfolio Services, Inc. (Nasdaq: CPSS) (“CPS” or the “Company”) today announced earnings of $7.0 million, or $0.22 per diluted share, for its second quarter ended June 30, 2014. This compares to net income of $4.8 million, or $0.15 per diluted share, in the second quarter of 2013, representing a 47% increase in earnings per diluted share. Earnings for the first six months of 2014 were $13.7 million, or $0.43 per diluted share, as compared to earnings of $8.6 million, or $0.27 per diluted share, for the same period in 2013.
Revenues for the second quarter of 2014 were $71.6 million, an increase of $1.1 million, or 1.6%, compared to $70.5 million for the second quarter of 2013. However, in the second quarter of 2013, revenues included $10.9 million from a gain on cancellation of debt. Excluding that gain, revenues for the second quarter of 2014 increased by $12.1 million, or 20.3%. Total operating expenses for the second quarter of 2014 were $59.3 million, a decrease of $2.7 million, or 4.3%, compared to $61.9 million for the 2013 period. However, in the second quarter of 2013, operating expenses included a provision for contingent liabilities of $9.7 million. Excluding the provision for contingent liabilities, operating expenses increased $7.0 million, or 13.3%. Pretax income for the second quarter of 2014 was $12.3 million compared to pretax income of $8.5 million in the second quarter of 2013, an increase of 44.3%.
For the six months ended June 30, 2014 total revenues were $139.7 million compared to $114.1 million for the six months ended June 30, 2013, excluding the gain from the cancellation of debt, an increase of approximately $25.6 million, or 22.4%. Total expenses for the six months ended June 30, 2014 were $115.6 million, an increase of $15.3 million, or 15.2%, compared to $100.3 million for the six months ended June 30, 2013, excluding the provision for contingent liabilities in that period. Pretax income for the six months ended June 30, 2014 was $24.1 million, compared to $15.1 million for the six months ended June 30, 2013.
During the second quarter of 2014, CPS purchased $211.4 million of new contracts compared to $189.9 million during the first quarter of 2014 and $203.8 million during the second quarter of 2013. The Company's managed receivables totaled $1.374 billion as of June 30, 2014, an increase from $1.295 billion as of March 31, 2014 and $1.067 billion as of June 30, 2013, as follows ($ in millions):
| Originating Entity | June 30, 2014 | March 31, 2014 | June 30, 2013 |
| CPS | $1,366.6 | $1,282.6 | $1,030.5 |
| Fireside Bank | 5.7 | 9.1 | 31.1 |
| As Third Party Servicer | 1.3 | 3.5 | 5.8 |
| Total | $1,373.6 | $1,295.2 | $1,067.4 |
Annualized net charge-offs for the second quarter of 2014 were 4.98% of the average owned portfolio as compared to 4.03% for the second quarter of 2013. Delinquencies greater than 30 days (including repossession inventory) were 6.21% of the total owned portfolio as of June 30, 2014, as compared to 5.16% as of June 30, 2013.
As previously reported, during June CPS closed its second term securitization transaction of 2014 and the 13th transaction since April 2011. In the senior subordinate structure, a special purpose subsidiary sold five tranches of asset-backed notes totaling $202.5 million. The notes are secured by automobile receivables purchased by CPS and have a weighted average effective coupon of approximately 2.37%. 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 first senior subordinate securitization to receive a triple "A" rating on the senior class of notes.
"We are pleased with our operating results for the second quarter of 2014," said Charles E. Bradley, Jr., Chairman and Chief Executive Officer. “We increased our new contract purchases and managed portfolio, and achieved continued earnings growth. In addition, we hit a milestone in one of our corporate objectives by earning a triple “A” rating on the senior class of notes in our 2014-B securitization, which contributed to an extremely low cost of funds on that transaction.”
Conference Call
CPS announced that it will hold a conference call on Tuesday, July 22, 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 July 22, 2014 and July 29, 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 76956813. 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
| Consumer Portfolio Services, Inc. and Subsidiaries | ||||||||||||||||
| Condensed Consolidated Statements of Operations | ||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Revenues: | ||||||||||||||||
| Interest income | $ | 68,221 | $ | 55,797 | $ | 133,217 | $ | 106,964 | ||||||||
| Servicing fees | 367 | 876 | 880 | 1,784 | ||||||||||||
| Other income | 3,006 | 2,862 | 5,643 | 5,380 | ||||||||||||
| Gain on cancellation of debt | - | 10,947 | - | 10,947 | ||||||||||||
| 71,594 | 70,482 | 139,740 | 125,075 | |||||||||||||
| Expenses: | ||||||||||||||||
| Employee costs | 11,774 | 11,527 | 22,664 | 20,476 | ||||||||||||
| General and administrative | 5,075 | 4,518 | 8,678 | 8,272 | ||||||||||||
| Interest | 11,942 | 14,601 | 25,323 | 30,947 | ||||||||||||
| Provision for credit losses | 25,627 | 17,371 | 49,508 | 32,519 | ||||||||||||
| Provision for contingent liabilities | - | 9,650 | - | 9,650 | ||||||||||||
| Other expenses | 4,847 | 4,269 | 9,474 | 8,137 | ||||||||||||
| 59,265 | 61,936 | 115,647 | 110,001 | |||||||||||||
| Income before income taxes | 12,329 | 8,546 | 24,093 | 15,074 | ||||||||||||
| Income tax expense | 5,303 | 3,721 | 10,362 | 6,464 | ||||||||||||
| Net income | $ | 7,026 | $ | 4,825 | $ | 13,731 | $ | 8,610 | ||||||||
| Earnings per share: | ||||||||||||||||
| Basic | $ | 0.28 | $ | 0.23 | $ | 0.56 | $ | 0.42 | ||||||||
| Diluted | $ | 0.22 | $ | 0.15 | $ | 0.43 | $ | 0.27 | ||||||||
| Number of shares used in computing earnings | ||||||||||||||||
| per share: | ||||||||||||||||
| Basic | 25,029 | 20,989 | 24,694 | 20,534 | ||||||||||||
| Diluted | 32,002 | 31,788 | 32,009 | 31,709 | ||||||||||||
| Condensed Consolidated Balance Sheets | ||||||||||||||||
| (In thousands) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| June 30, | December 31, | |||||||||||||||
| 2014 | 2013 | |||||||||||||||
| Assets: | ||||||||||||||||
| Cash and cash equivalents | $ | 14,426 | $ | 22,112 | ||||||||||||
| Restricted cash and equivalents | 154,902 | 132,284 | ||||||||||||||
| Total cash and cash equivalents | 169,328 | 154,396 | ||||||||||||||
| Finance receivables | 1,312,745 | 1,155,063 | ||||||||||||||
| Allowance for finance credit losses | (53,326) | (39,626) | ||||||||||||||
| Finance receivables, net | 1,259,419 | 1,115,437 | ||||||||||||||
| Finance receivables measured at fair value | 5,686 | 14,476 | ||||||||||||||
| Residual interest in securitizations | 260 | 854 | ||||||||||||||
| Deferred tax assets, net | 51,550 | 59,215 | ||||||||||||||
| Other assets | 54,831 | 51,988 | ||||||||||||||
| $ | 1,541,074 | $ | 1,396,366 | |||||||||||||
| Liabilities and Shareholders' Equity: | ||||||||||||||||
| Accounts payable and accrued expenses | $ | 24,252 | $ | 24,839 | ||||||||||||
| Warehouse lines of credit | 41,290 | 9,452 | ||||||||||||||
| Residual interest financing | 14,079 | 19,096 | ||||||||||||||
| Debt secured by receivables measured at fair value | 5,392 | 13,117 | ||||||||||||||
| Securitization trust debt | 1,326,319 | 1,177,559 | ||||||||||||||
| Senior secured debt, related party | -- | 38,559 | ||||||||||||||
| Subordinated renewable notes | 18,038 | 19,142 | ||||||||||||||
| 1,429,370 | 1,301,764 | |||||||||||||||
| Shareholders' equity | 111,704 | 94,602 | ||||||||||||||
| $ | 1,541,074 | $ 1,396,366 | ||||||||||||||
| Operating and Performance Data ($ in millions) | ||||||||||||||||
| At and for the | At and for the | |||||||||||||||
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Contracts purchased | $ | 211.38 | $ | 203.78 | $ | 401.27 | $ | 383.90 | ||||||||
| Contracts securitized | 200.21 | 209.64 | 374.80 | 370.90 | ||||||||||||
| Total managed portfolio | $ | 1,373.58 | $ | 1,067.42 | $ | 1,373.58 | $ | 1,067.42 | ||||||||
| Average managed portfolio | 1,343.46 | 1,034.57 | 1,309.13 | 989.31 | ||||||||||||
| Allowance for finance credit losses as % of fin. receivables | 4.06% | 3.30% | ||||||||||||||
| Aggregate allowance as % of fin. receivables (1) | 5.19% | 4.02% | ||||||||||||||
| Delinquencies | ||||||||||||||||
| 31+ Days | 4.10% | 3.82% | ||||||||||||||
| Repossession Inventory | 2.11% | 1.34% | ||||||||||||||
| Total Delinquencies and Repo. Inventory | 6.21% | 5.16% | ||||||||||||||
| Annualized net charge-offs as % of average owned portfolio | 4.98% | 4.03% | 5.25% | 4.12% | ||||||||||||
| Recovery rates (2) | 49.2% | 48.6% | 48.6% | 48.8% | ||||||||||||
| For the | For the | |||||||||||||||
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| $(3) | % (4) | $ (3) | % (4) | $ (3) | % (4) | $ (3) | % (4) | |||||||||
| Interest income | $ | 68.22 | 20.3% | $ 55.80 | 21.6% | $ 133.22 | 20.4% | $ 106.96 | 21.6% | |||||||
| Servicing fees and other income | 3.37 | 1.0% | 3.74 | 1.4% | 6.52 | 1.0% | 7.16 | 1.4% | ||||||||
| Interest expense | (11.94) | -3.6% | (14.60) | -5.6% | (25.32) | -3.9% | (30.95) | -6.3% | ||||||||
| Net interest margin | 59.65 | 17.8% | 44.93 | 17.4% | 114.42 | 17.5% | 83.18 | 16.8% | ||||||||
| Provision for credit losses | (25.63) | -7.6% | (17.37) | -6.7% | (49.51) | -7.6% | (32.52) | -6.6% | ||||||||
| Risk adjusted margin | 34.03 | 10.1% | 27.56 | 10.7% | 64.91 | 9.9% | 50.66 | 10.2% | ||||||||
| Core operating expenses | (21.70) | -6.5% | (20.31) | -7.9% | (40.82) | -6.2% | (36.89) | -7.5% | ||||||||
| Provision for contingent liabilities | - | 0.0% | (9.65) | -3.7% | - | 0.0% | (9.65) | -2.0% | ||||||||
| Gain on cancellation of debt | - | 0.0% | 10.95 | 4.2% | - | 0.0% | 10.95 | 2.2% | ||||||||
| Pre-tax income | $ | 12.33 | 3.7% | $ 8.55 | 3.3% | $ 24.09 | 3.7% | $ 15.07 | 3.0% | |||||||
| (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. | ||||||||||||||||