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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________ .
COMMISSION FILE NUMBER: 1-11416
CONSUMER PORTFOLIO SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 33-0459135
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
16355 LAGUNA CANYON ROAD, IRVINE, CALIFORNIA 92618
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER: (949) 753-6800
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT: N/A
Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of August 8, 2001, the registrant had 19,556,460 common shares
outstanding.
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CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2001 and December 31, 2000.............. 1
Condensed Consolidated Statements of Operations for the three-month and six-month periods
ended June 30, 2001 and 2000 ............................................................. 2
Condensed Consolidated Statements of Cash Flows for the six-month period
ended June 30, 2001 and 2000.............................................................. 3
Notes to Condensed Consolidated Financial Statements......................................... 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........ 9
Item 3. Quantitative and Qualitative Disclosure About Market Risk.................................... 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................................................ 14
Item 4. Submission of Matters to a Vote of Shareholders.............................................. 15
Item 6. Exhibits and Reports on Form 8-K............................................................. 15
Signatures............................................................................................ 16
ITEM 1. FINANCIAL STATEMENTS
CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
JUNE 30, DECEMBER 31,
2001 2000
---------- ----------
(UNAUDITED)
ASSETS
Cash $ 2,982 $ 19,051
Restricted cash 6,797 5,264
Contracts held for sale 4,222 18,830
Servicing fees receivable 4,552 3,204
Residual interest in securitizations 111,498 99,199
Furniture and equipment, net 2,436 2,559
Deferred financing costs 1,364 1,898
Related party receivables 866 899
Deferred interest expense 6,707 8,102
Deferred tax assets, net 7,081 7,189
Other assets 7,851 9,499
---------- ----------
$ 156,356 $ 175,694
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued expenses $ 10,050 $ 10,958
Warehouse line of credit - 2,003
Capital lease obligation 749 998
Notes payable 1,986 2,414
Senior secured debt 26,000 38,000
Subordinated debt 37,158 37,699
Related party debt 17,500 21,500
---------- ----------
93,443 113,572
SHAREHOLDERS' EQUITY
Preferred stock, $1 par value;
authorized 5,000,000 shares; none issued - -
Series A preferred stock, $1 par value;
authorized 5,000,000 shares;
3,415,000 shares issued; none outstanding - -
Common stock, no par value; authorized
30,000,000 shares; 20,521,101 and 20,367,901
shares issued, 19,541,160 and 19,647,149
shares outstanding at June 30, 2001 and
December 31, 2000, respectively 65,157 64,277
Retained earnings (deficit) 296 (131)
Deferred compensation (789) (734)
Treasury stock, 979,941 and 720,752 shares
at June 30, 2001 and December 31, 2000,
respectively, at cost (1,751) (1,290)
---------- ----------
62,913 62,122
---------- ----------
$ 156,356 $ 175,694
========== ==========
See accompanying Notes to Condensed Consolidated Financial Statements
1
CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
2001 2000 2001 2000
--------- --------- --------- ---------
REVENUES:
Gain on sale of contracts, net $ 9,121 $ 3,495 $ 18,492 $ 7,841
Interest income (loss) 4,299 5,792 9,313 (3,165)
Servicing fees 2,628 4,289 5,208 9,385
Other income (loss) 272 (26) 632 (137)
--------- --------- --------- ---------
16,320 13,550 33,645 13,924
--------- --------- --------- ---------
EXPENSES:
Employee costs 5,918 5,585 12,870 12,378
General and administrative 3,799 4,485 6,666 8,013
Interest 3,489 3,991 7,758 8,769
Marketing 1,804 1,418 3,724 2,938
Occupancy 824 967 1,593 1,925
Depreciation and amortization 245 290 487 592
Related party consulting fees - - - 12
--------- --------- --------- ---------
16,079 16,736 33,098 34,627
--------- --------- --------- ---------
Earnings (loss) before income taxes
(benefit) 241 (3,186) 547 (20,703)
Income tax expense (benefit) - - 120 (6,420)
--------- --------- --------- ---------
Net earnings (loss) $ 241 $ (3,186) $ 427 $(14,283)
========= ========= ========= =========
Earnings (loss) per share:
Basic $ 0.01 $ (0.16) $ 0.02 $ (0.71)
Diluted 0.01 (0.16) 0.02 (0.71)
Number of shares used in computing
earnings (loss) per share:
Basic 19,540 20,319 19,558 20,232
Diluted 21,222 20,319 21,297 20,232
See accompanying Notes to Condensed Consolidated Financial Statements
2
CONSUMER PORTFOLIO SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
SIX MONTHS ENDED
JUNE 30,
-------------------------
2001 2000
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 427 $ (14,283)
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Depreciation and amortization 487 592
Amortization of deferred financing costs 534 439
Provision for (recovery of) credit losses (3,092) 800
NIR gains recognized (5,096) -
Deferred compensation 729 -
Equity in net loss of investment in
unconsolidated affiliates - 755
Releases of cash from Trusts to Company 21,480 38,223
Net deposits to spread accounts (13,321) (4,830)
(Increase) decrease in receivables from
Trusts and investment in subordinated
certificates, net (15,362) 6,343
Changes in assets and liabilities:
Restricted cash (1,533) 1,184
Purchases of contracts held for sale (371,883) (296,248)
Liquidation of contracts held for sale 389,584 295,938
Other assets 1,677 3,432
Accounts payable and accrued expenses (908) (3,094)
Warehouse line of credit (2,003) -
Deferred tax asset/liability 108 (6,318)
Taxes payable/receivable - 1,631
---------- ----------
Net cash provided by operating activities 1,828 24,564
CASH FLOWS FROM INVESTING ACTIVITIES:
Net related party receivables 33 (20)
Purchases of furniture and equipment (346) -
---------- ----------
Net cash used in investing activities (313) (20)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in senior secured debt - 16,000
Repayment of senior secured debt (12,000) (23,161)
Repayment of subordinated debt (541) (32)
Repayment of capital lease obligations (249) (307)
Repayment of notes payable (428) (845)
Repayment of related party debt (4,000) -
Payment of financing costs - (539)
Repurchase of common stock (461) -
Exercise of options and warrants 95 13
---------- ----------
Net cash used in financing activities (17,584) (8,871)
---------- ----------
Increase (decrease) in cash (16,069) 15,673
Cash at beginning of period 19,051 1,640
---------- ----------
Cash at end of period $ 2,982 $ 17,313
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 5,863 $ 6,976
Income taxes 12 990
Supplemental disclosure of non-cash investing
and financing activities:
Issuance of common stock upon restructuring
of debt $ -- $ 311
Reclassification of subordinated debt -- 30,000
Stock compensation 729 --
See accompanying Notes to Condensed Consolidated Financial Statements
3
CONSUMER PORTFOLIO SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Consumer Portfolio Services, Inc. and its subsidiaries (collectively,
the "Company") primarily engage in the business of purchasing, selling and
servicing retail automobile installment sale contracts ("Contracts") originated
by automobile dealers ("Dealers") located throughout the United States. As of
the date of this report the Company is active in 39 states. Through its purchase
of Contracts, the Company provides indirect financing to Dealer customers with
limited credit histories, low incomes or past credit problems, who generally
would not be expected to qualify for financing provided by banks or by
automobile manufacturers' captive finance companies.
BASIS OF PRESENTATION
The unaudited Condensed Consolidated Financial Statements of the
Company have been prepared in conformity with accounting principles generally
accepted in the United States of America, and the instructions of Form 10-Q and
Article 10 of Regulation S-X of the Securities and Exchange Commission, and
include all adjustments that are, in the opinion of management, necessary for a
fair presentation of the results for the interim periods presented. All such
adjustments are, in the opinion of management, of a normal recurring nature. In
addition, certain items in prior period financial statements have been
reclassified for comparability to current period presentation. Results for the
three-month and six-month periods ended June 30, 2001 are not necessarily
indicative of the operating results to be expected for the full year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted. These
Condensed Consolidated Financial Statements should be read in conjunction with
the Consolidated Financial Statements and Notes to Consolidated Financial
Statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2000.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended by SFAS No. 137 and SFAS No. 138
(collectively "SFAS No. 133"). SFAS No. 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives), and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. If certain conditions are met, a derivative may be specifically
designated as (a) a hedge of the exposure to changes in the fair value of a
recognized asset or liability or of an unrecognized firm commitment, (b) a hedge
of the exposure to variable cash flows of a forecasted transaction, or (c) a
hedge of the foreign currency exposure of a net investment in foreign
operations, an unrecognized firm commitment, an available-for-sale security, or
a foreign-currency-denominated forecasted transaction.
Under SFAS No. 133, an entity that elects to apply hedge accounting is
required to establish at the inception of the hedge the method it will use for
assessing the effectiveness of the hedging derivative and the measurement
approach for determining the ineffective aspect of the hedge. Those methods must
be consistent with the entity's approach to managing risk. This statement became
effective for the Company on January 1, 2001. The adoption of SFAS No. 133 did
not have an effect on the Company.
In September 2000, the FASB issued Statement of Financial Accounting
Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities -- A Replacement for FASB Statement No. 125"
("SFAS 140"). The new statement, SFAS 140, revises the standards for accounting
for securitizations and for other transfers of financial assets and collateral.
SFAS 140 also requires certain disclosures that were not required under FASB
Statement No. 125. The accounting provisions of SFAS 140 applied to the Company
for transfers of financial assets occurring after March 31, 2001, and the
reclassification and disclosure provisions applied to the Company for fiscal
4
CONSUMER PORTFOLIO SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
years ending after December 15, 2000. Because most of the provisions of FASB
Statement No. 125 are carried over into SFAS 140 without change, the adoption
and implementation of SFAS 140 has not had a material effect on the Company's
financial condition or results of operations.
In July 2001, the FASB issued Statement No. 141, "Accounting for
Business Combinations" ("SFAS 141"), and Statement No. 142, "Accounting for
Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 141 requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001, as well as all purchase method business combinations
completed after June 30, 2001. SFAS 141 also specifies certain criteria
intangible assets acquired in a purchase method business combination must meet
in order to be recognized and reported apart from goodwill. SFAS 142 will
require that goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead be tested for impairment at least annually in
accordance with the provisions of SFAS 142. SFAS 142 will also require that
intangible assets with definite useful lives be amortized over their respective
estimated useful lives to their estimated residual values, and reviewed for
impairment in accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of. "
The Company is required to adopt the provisions of SFAS 141
immediately, and SFAS 142 effective January 1, 2002. Furthermore, any goodwill
and any intangible asset determined to have an indefinite useful life acquired
in a purchase business combination completed after June 30, 2001 will not be
amortized, but will continue to be evaluated for impairment in accordance with
the appropriate pre-SFAS 142 accounting literature. Goodwill and intangible
assets acquired in business combinations completed before July 1, 2001 will
continue to be amortized prior to the adoption of SFAS 142.
SFAS 141 will require, upon adoption of Statement 142, that the Company
evaluate its existing goodwill and intangible assets that were acquired in a
prior purchase business combination, and to make any necessary reclassifications
in order to conform to the new criteria in SFAS 141 for recognition apart from
goodwill. Upon adoption of SFAS 142, the Company will be required to reassess
the useful lives and residual values of all intangible assets acquired in
purchase business combinations, and to make any necessary amortization period
adjustments by the end of the first interim period after adoption. In addition,
to the extent an intangible asset is identified as having an indefinite useful
life, the Company will be required to test the intangible asset for impairment
in accordance with the provisions of SFAS 142 within the first interim period.
Any impairment loss will be measured as of the date of adoption and recognized
as the cumulative effect of a change in accounting principle in the first
interim period.
In connection with the transitional goodwill impairment evaluation,
SFAS 142 will require the Company to perform an assessment of whether there is
an indication that goodwill is impaired as of the date of adoption. Any
transitional impairment loss will be recognized as the cumulative effect of a
change in accounting principle in the Company's Consolidated Statement of
Operations. Unamortized negative goodwill existing at the date SFAS 142 is
adopted must be written off as the cumulative effect of a change in accounting
principle.
The Company does not believe that the adoption and implementation of
SFAS 141 and SFAS 142 will have a material effect on its financial condition or
results of operations.
5
CONSUMER PORTFOLIO SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) CONTRACTS HELD FOR SALE
The following table presents the components of Contracts held for sale:
JUNE 30, DECEMBER 31,
2001 2000
--------- ---------
(IN THOUSANDS)
Gross receivable balance .............. $ 4,891 $ 21,426
Unearned finance charges .............. (11) (308)
Deferred acquisition fees and discounts (5) (121)
Allowance for credit losses ........... (653) (2,167)
--------- ---------
Net contracts held for sale ........... $ 4,222 $ 18,830
========= =========
(3) RESIDUAL INTEREST IN SECURITIZATIONS
The following table presents the components of the residual interest in
securitizations:
JUNE 30, DECEMBER 31,
2001 2000
--------- ---------
(IN THOUSANDS)
Cash, commercial paper, United States
government securities and other qualifying
investments (Spread Account) ............. $ 52,396 $ 60,554
Receivables from Trusts .................... 59,099 38,639
Investment in subordinated certificates .... 3 6
--------- ---------
Residual interest in securitizations ....... $111,498 $ 99,199
======== ========
The following table presents estimated remaining undiscounted credit
losses included in the estimated fair value of the residual interest in
securitizations as a percentage of the Company's servicing portfolio subject to
recourse provisions:
JUNE 30, DECEMBER 31,
2001 2000
------------ ------------
(IN THOUSANDS)
Undiscounted estimated credit losses ............. $ 16,841 $ 17,819
============ ============
Servicing subject to recourse provisions ......... $ 347,910 $ 389,602
============ ============
Undiscounted estimated credit losses as percentage
of servicing subject to recourse provisions .... 4.84% 4.57%
============ ============
During the three-month and six-month periods ended June 30, 2001, the
Company sold approximately $39.9 million and $92.7 million of Contracts,
respectively, excluding contracts sold on a flow basis. Such sales resulted in
an increase to receivables from the Company's trusts ("Trusts") of $11.4 million
for the three-month period ended June 30, 2001, of which $2.2 million was net
interest receivables ("NIRs"), and an increase to receivables from Trusts of
$27.1 million for the six-month period ended June 30, 2001, $5.1 million of
which was NIRs. Such NIRs are included as a component of gain on sale of
Contracts. See Note 4.
6
CONSUMER PORTFOLIO SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) GAIN ON SALE OF CONTRACTS
The following table presents components of net gain on sale of
Contracts:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- -----------------------
2001 2000 2001 2001
--------- --------- --------- ---------
(IN THOUSANDS)
Gain recognized on sale $ 6,633 $ 3,936 $ 14,169 $ 8,783
Deferred acquisition fees and discounts 807 70 2,088 79
Expenses related to sales (747) (111) (857) (221)
(Provision for) recovery of credit losses 2,428 (400) 3,092 (800)
--------- --------- --------- ---------
Net gain on sale of contracts $ 9,121 $ 3,495 $ 18,492 $ 7,841
========= ========= ========= =========
(5) INTEREST INCOME
The following table presents the components of interest income:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
2001 2000 2001 2000
-------- -------- -------- --------
(IN THOUSANDS)
Interest on Contracts held for sale $ 349 $ 238 $ 1,894 $ 534
Residual interest income, net 3,818 5,301 7,152 (3,979)
Other interest income 132 253 267 280
-------- -------- -------- --------
Net interest income $ 4,299 $ 5,792 $ 9,313 $(3,165)
======== ======== ======== ========
Beginning in the second quarter of 2000, the Company refined its method
of calculating residual interest income in order to accrete residual interest
income on a level yield basis. The Company now uses an accretion rate that
approximates the discount rate used to value the residual interest in
securitizations, approximately 14% per annum. Prior to such period, and for the
three-month period ended March 31, 2000, the Company recognized residual
interest income as the excess cash flows generated by the Trusts over the
related obligations of the Trusts, net of any amortization of the related NIRs.
This method of residual interest income recognition approximated a level yield
rate due to the continued addition of new securitizations. Since the Company had
not securitized any Contracts since December 1998, this method was refined
during the second quarter of 2000.
7
CONSUMER PORTFOLIO SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(6) EARNINGS (LOSS) PER SHARE
Diluted earnings (loss) per share for the three-month and six-month
periods ended June 30, 2001 and 2000 were calculated using the weighted average
number of shares outstanding for the related period. The following table
reconciles the number of shares used in the computations of basic and diluted
earnings (loss) per share for the three-month and six-month periods ended June
30, 2001 and 2000:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
2001 2000 2001 2000
------- ------- ------- -------
(IN THOUSANDS)
Weighted average number of common shares
outstanding during the period used to
compute basic earnings (loss) per share 19,540 20,319 19,558 20,232
Incremental common shares attributable to
exercise of outstanding options and
warrants 1,682 -- 1,739 --
------- ------- ------- -------
Number of common shares used to compute
diluted earnings (loss) per share 21,222 20,319 21,297 20,232
======= ======= ======= =======
If the anti-dilutive effects of common stock equivalents were not
considered, additional shares included in the diluted earnings per share
calculation for the three-month and six-month periods ended June 30, 2001 would
have included an additional 1.1 million shares from incremental shares
attributable to the conversion of certain subordinated debt, for an aggregate
total of approximately 22.3 million diluted shares for the three-month period
ending June 30, 2001 and 22.4 million diluted shares for the six-month period
ending June 30, 2001. Additional shares included in the diluted loss per share
calculation for the three-month and six-month periods ended June 30, 2000, would
have included an additional 1.3 million and 1.6 million, respectively, from
outstanding stock options and warrants and an additional 2.4 million,
respectively, from incremental shares attributable to the conversion of certain
subordinated debt, for an aggregate total of approximately 24.1 million diluted
shares for the three-month period ending June 30, 2000, and 24.2 million diluted
shares for the six-month period ending June 30, 2000.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THE THREE-MONTH PERIOD ENDED JUNE 30, 2001 COMPARED TO THE THREE-MONTH PERIOD
ENDED JUNE 30, 2000
REVENUES. During the three months ended June 30, 2001, revenues
increased approximately $2.8 million, or 20.4%, to $16.3 million, compared to
$13.6 million for the three-month period ended June 30, 2000. The primary
components of the period over period increase are an increase in gain on sale of
Contracts of $5.6 million, or 161.0%, to $9.1 million in the three-month period
ended June 30, 2001, compared to $3.5 million in the year earlier period; that
increase was offset, in part, by decreases in interest income and servicing
fees. The primary reason for the fluctuation in the gain on sale component of
revenue is the Company's securitization of approximately $39.9 million of
Contracts in the 2001 period, resulting in a gain on sale of Contracts of $2.2
million. The availability and structure of the Company's note purchase facility
enabled it to execute securitization transactions during 2001; no such sales
occurred in the prior year period. Additionally, gain on sale of Contracts
includes the effect of fluctuations in the Company's estimate of the required
(provision for) recovery of losses on Contracts. During 2001 recoveries have
exceeded the provision for losses, in 2000 the provision for losses was greater
than recoveries. See Note 4 of Notes to Condensed Consolidated Financial
Statements. See "Liquidity and Capital Resources."
Interest income for the three-month period ended June 30, 2001
decreased $1.5 million, or 25.8%, to $4.3 million in 2001 from $5.8 million in
2000. Similarly, servicing fees totaling $2.6 million in the three months ended
June 30, 2001 decreased $1.7 million, or 38.7%, from $4.3 million in the same
period a year earlier. The decrease in interest income and servicing fees can be
attributed to the contraction of the Company's servicing portfolio, which
includes balances related to on- and off-balance sheet Contracts purchased on an
other than flow basis. See Note 5 of Notes to Condensed Consolidated Financial
Statements. At June 30, 2001 the Company was generating interest income and
servicing fees on a portfolio with an outstanding principal balance
approximating $354.2 million, compared to a portfolio with an outstanding
principal balance approximating $583.7 million as of June 30, 2000. The Company
began acquiring Contracts for its servicing portfolio again in December 2000.
The volume of Contracts the Company is currently acquiring on an other than flow
basis, however, is less than the amortization of the previously existing
portfolio. The principal balance of the servicing portfolio, therefore,
continues to decline. The Company expects that its servicing portfolio will
continue to decrease in the near term and level off sometime during 2001, at
which time interest income and servicing fees will stabilize. There can be no
assurance that the Company will be able to purchase and hold sufficient
Contracts in order to stabilize this trend.
EXPENSES. The Company's operating expenses consist primarily of
personnel costs and other operating expenses, which are incurred as
applications/Contracts are received, processed and serviced. The changes in the
market environment, mix of business between Contracts purchased on a flow basis
versus Contracts purchased on an other than flow basis impact margins and net
earnings. The Company has implemented programs and taken the necessary actions
to maintain expense levels consistent with expected revenue; however, a short
time lag does exist in reducing variable costs and certain fixed costs are
incurred regardless of revenue levels.
Personnel costs include base salaries, commissions and bonuses paid to
employees, and certain expenses related to the accounting treatment of
outstanding warrants and stock options, and are one of the Company's most
significant operating expenses. These costs generally fluctuate with the level
of applications/Contracts processed and serviced, with the mix of revenue and
with overall portfolio performance. Other operating expenses consist primarily
of facilities expenses, telephone and other communication services, credit
services, computer services (including personnel costs associated with
information technology support), professional services, marketing and
advertising expenses, and depreciation and amortization. The Company is
committed to cost control measures, and has implemented cost control programs
designed to maintain operating expenses at levels consistent with the expected
revenue, including mix of business, and overall portfolio performance. However,
certain fixed costs are incurred regardless of revenue levels, resulting in
period over period fluctuations. The Company's cost control programs are
designed to evaluate expenses, both current and budgeted, relative to existing
and projected market conditions.
Total operating expenses, excluding interest expense related to the
Company's outstanding notes payable and debt, were $12.6 million, or 77.1%, of
total revenues for the second quarter of 2001, as compared with $12.7 million,
or 94.1%, of total revenues for the second quarter of 2000. Overall trends in
expenses have been consistent with the increase in the Company's revenue when
compared to the prior year, excluding certain non-recurring expenses recorded in
the 2000 period of approximately $1.0 million.
9
Interest expense for the three-month period ended June 30, 2001 has
decreased $502,000, or 12.6%, to $3.5 million in 2001 compared to $4.0 million
in 2000. The decrease is primarily due to the reduction of the outstanding
principal balance of certain of the Company's senior secured and subordinated
debt. Aggregate senior secured and subordinated debt outstanding at June 30,
2001, totaled $80.7 million compared to $106.5 million at June 30, 2000 and
$97.2 million at December 31, 2000. See "Liquidity and Capital Resources."
THE SIX-MONTH PERIOD ENDED JUNE 30, 2001 COMPARED TO THE SIX-MONTH
PERIOD ENDED JUNE 30, 2000
This discussion of the results of operations for the six-month period
ended June 30, 2001 compared to the six-month period ended June 30, 2000 should
be read in conjunction with the discussion of the results of operations for the
three-month period ended June 30, 2001 compared to the three-month period ended
June 30, 2000 above.
During the six months ended June 30, 2001, revenues increased
approximately $19.7 million, or 141.6%, to $33.6 million compared to $13.9
million for the six-month period ended June 30, 2000. The primary components of
the period over period increase are increases in gain on sale of Contracts of
$10.7 million, or 135.8%, to $18.5 million in the six-month period ended June
30, 2001 compared to $7.8 million in the year earlier period, as well as a
significant increase in interest income as described below, offset by a decrease
in servicing fees. The primary reason for the fluctuation in the gain on sale
component of revenue is the Company's securitization of approximately $92.7
million of Contracts in the 2001 period, resulting in a gain on sale of
Contracts of $5.1 million. The availability and structure of the Company's note
purchase facility enabled it to execute securitization transactions during 2001,
no such sales occurred in the prior year period. Additionally, gain on sale of
Contracts includes the effect of fluctuations in the Company's estimate of the
required (provision for) recovery of losses on Contracts. During 2001 recoveries
have exceeded the provision for losses, in 2000 the provision for losses was
greater than recoveries. See Note 4 of Notes to Condensed Consolidated Financial
Statements.
Interest income increased $12.5 million to $9.3 million during the
six-month period ended June 30, 2001 from a ($3.2) million interest charge in
the prior year period. The increase in interest income is primarily due to the
increase in residual interest income resulting from a change in the method
residual interest income is calculated beginning in the second quarter of 2000.
During the three-month period ended March 31, 2001 residual interest income
increased to $3.3 million from an interest charge of($9.3) million for the
three-month period ended March 31, 2000. The increase in residual interest
income during the March 2001 period is due to the Company refining its
methodology of calculation of such interest income beginning with the
three-month period ended June 30, 2000. The refined method is designed to
accrete residual interest income on a level yield basis. The Company now uses an
accretion rate that approximates the discount rate used to value the residual
interest in securitizations, approximately 14% per annum. Prior to such period,
and for the three-month period ended March 31, 2000, the Company recognized
residual interest income as the excess cash flows generated by the Trusts over
the related obligations of the Trusts, net of any amortization of the related
NIRs. This method of residual interest income recognition approximated a level
yield rate of residual interest income due to the continued addition of new
securitizations. Since the Company had not securitized any Contracts since
December 1998, this method was refined during the second quarter of 2000. The
effect of this refinement has been offset, in part, by the contraction of the
Company's servicing portfolio.
Servicing fees totaled $5.2 million in the six months ended June 30,
2001, compared to $9.4 million in the same period a year earlier. The decrease
in interest income and servicing fees can be attributed to the contraction of
the Company's servicing portfolio.
The period over period fluctuations in other income (loss) were not
material.
EXPENSES. Total operating expenses, excluding interest expense related
to the Company's outstanding notes payable and debt, were $25.3 million, or
75.3%, of total revenues for the six-month period ended June 30, 2001, as
compared with $25.9 million, or 185.7%, of total revenues for the same period of
2000. Overall trends in expenses have been consistent with the increase in the
Company's revenue when compared to the prior year, excluding certain
non-recurring expenses recorded in the 2000 period of approximately $1.0
million.
10
Interest expense for the six-month period ended June 30, 2001 has
decreased $1.0 million, or 11.5%, to $7.8 million in 2001 compared to $8.8
million in 2000. The decrease is primarily due to the reduction of the
outstanding principal balance of certain of the Company's senior secured and
subordinated debt.
LIQUIDITY AND CAPITAL RESOURCES
The Company's business requires substantial cash to support its
purchases of Contracts and other operating activities. The Company's primary
sources of cash have been cash flows from operating activities, including
proceeds from sales of Contracts, amounts borrowed under various revolving
credit facilities (sometimes known as warehouse lines), servicing fees on
portfolios of Contracts previously sold, customer payments of principal and
interest on Contracts held for sale, fees for origination of Contracts, and
releases of cash from securitized pools of Contracts in which the Company has
retained a residual ownership interest. The Company's primary uses of cash have
been the purchases of Contracts, repayment of amounts borrowed under lines of
credit and otherwise, operating expenses such as employee, interest, and
occupancy expenses, the establishment of and further contributions to "Spread
Accounts" (cash posted to enhance credit of securitized pools), and income
taxes. There can be no assurance that internally generated cash will be
sufficient to meet the Company's cash demands. The sufficiency of internally
generated cash will depend on: the performance of securitized pools (which
determines the level of releases from Spread Accounts), the rate of expansion or
contraction in the Company's servicing portfolio, and the terms upon which the
Company is able to acquire, sell, and borrow against Contracts.
Net cash provided by operating activities for the six-month periods
ended June 30, 2001, and 2000, was $1.8 million and $24.6 million, respectively.
Contracts are purchased from Dealers for a cash price approximating
their principal amount, and generate cash flow over a period of years. As a
result, the Company has been dependent on revolving credit facilities to
purchase Contracts, and on the availability of cash from outside sources in
order to finance its continuing operations, as well as to fund the portion of
Contract purchase prices not financed under revolving credit facilities. The
Company's Contract purchasing program currently comprises both (i) purchases
made on other than a flow basis for the Company's own account, funded primarily
by advances under a revolving credit facility, and (ii) flow purchases for
immediate resale to non-affiliates. Flow purchases allow the Company to purchase
Contracts with minimal demands on liquidity. The Company's revenues from the
resale of flow purchase Contracts, however, are materially less than those that
may be received by holding Contracts to maturity or by selling Contracts in
securitization transactions. During the six-month period ended June 30, 2001,
the Company purchased $287.2 million of Contracts on a flow basis, and $84.7
million on an other than flow basis for its own account, compared to $296.2
million of Contracts purchased in the prior year period, all of which was
purchased on a flow basis.
During the six-month period ended June 30, 2001, the Company purchased
Contracts other than on a flow basis, which it had not done in the year earlier
period. Funding for the other than flow basis purchases was available from the
Company's $75 million revolving note purchase facility, established in November
2000. Since November 2000, the Company has been able to purchase Contracts for
its own account using proceeds from a $75 million revolving note purchase
facility. Approximately 75% of the principal balance of Contracts may be
advanced to the Company thereunder, subject to a collateral test and certain
other conditions and covenants. Notes issued under this facility bear interest
at one-month LIBOR plus .30% per annum. The note purchase facility was modified
during March 2001, with the effect that sales of Contracts to the
facility-related special purpose subsidiary ("SPS") are treated as an ongoing
securitization. The Company, therefore, removes the securitized Contracts and
related debt from its Condensed Consolidated Balance Sheet and recognizes a gain
on sale in the Company's Condensed Consolidated Statement of Operations.
Purchases of Contracts made on other than on a flow basis required that the
Company fund the portion of Contract purchase prices beyond what the related SPS
was able to borrow in the continuous securitization structure, which in the
aggregate required cash of approximately $23.5 million in the six-month period
ended June 30, 2001. The Company has securitized $92.7 of contracts during that
six-month period, resulting in a gain on sale of $5.1 million. The Company also
purchases Contracts on a flow basis, which, as compared with purchases of
Contracts for the Company's own account, involves a materially reduced demand on
the Company's cash. The Company's plan for meeting its liquidity needs is to
adjust (i) its levels of Contract purchases and, (ii) the mix between flow
purchases and purchases for its own account to match its availability of cash.
11
Cash used for subsequent deposits to Spread Accounts for the six-month
periods ended June 30, 2001 and 2000, was $13.3 million and $4.8 million,
respectively. Cash released from Spread Accounts to the Company for the
six-month periods ended June 30, 2001 and 2000, was $21.5 million and $38.2
million, respectively. Changes in deposits to and releases from Spread Accounts
are affected by the relative size, seasoning and performance of the various
pools of Contracts sold to which the respective Spread Accounts are related.
From June 1998 to November 1999, the Company's liquidity was adversely
affected by the absence of releases from Spread Accounts. Such releases did not
occur because a number of the Trusts had incurred cumulative net losses as a
percentage of the original Contract balance or average delinquency ratios in
excess of the predetermined levels specified in the respective agreements
governing the securitizations ("Securitization Agreements"). Accordingly,
pursuant to the Securitization Agreements, the specified levels applicable to
the Company's Spread Accounts were increased, in most cases to an unlimited
amount. Due to cross collateralization provisions of the Securitization
Agreements, the specified levels were increased on all but the two most recent
of the Company's Trusts. Increased specified levels for the Spread Accounts have
been in effect from time to time in the past. As a result of the increased
Spread Account specified levels and cross collateralization provisions, excess
cash flows that would otherwise have been released to the Company instead were
retained in the Spread Accounts to bring the balance of those Spread Accounts up
to higher levels. In addition to requiring higher Spread Account levels, the
Securitization Agreements provide the financial guaranty insurer with certain
other rights and remedies, some of which have been waived on a recurring basis
by the financial guaranty insurer with respect to all of the Trusts. Until the
November 1999 effectiveness of an amendment (the "Amendment") to the
Securitization Agreements, no material releases from any of the Spread Accounts
were available to the Company. Upon effectiveness of the Amendment, the
requisite Spread Account levels in general have been set at 21% of the
outstanding principal balance of the asset-backed securities ("Certificates")
issued by the related Trusts. The 21% level is subject to adjustment to reflect
over collateralization. Older Trusts may require more than 21% of credit
enhancement if the Certificate balance has amortized to such a level that
"floor" or minimum levels of credit enhancement are applicable.
In the event of certain defaults by the Company, the specified level
applicable to such credit enhancement could increase from 21% to an unlimited
amount, but such defaults are narrowly defined, and the Company does not
anticipate suffering such defaults. The Amendment has been effective since
November 1999, and the Company has received releases of cash from the
securitized portfolio on a monthly basis thereafter. The releases of cash are
expected to continue and to vary in amount from month to month. There can be no
assurance that such releases of cash will continue in the future.
The Company's ability to adjust the quantity of Contracts that it
purchases and sells will be subject to general competitive conditions and other
factors. The Company's ability to vary the mix of Contract sales between the
flow purchasers and its SPS is dependent on the willingness of flow purchasers
to purchase Contracts and the continued availability of the revolving note
purchase facility. There can be no assurance that the desired level of Contract
acquisition can be maintained or increased. Obtaining releases of cash from the
Spread Accounts is dependent on collections from the related Trusts generating
sufficient cash to maintain the Spread Accounts in excess of the amended
specified levels. There can be no assurance that collections from the related
Trusts will generate cash in excess of the amended specified levels.
The acquisition of Contracts for subsequent sale in securitization
transactions, and the need to fund Spread Accounts when those transactions take
place, results in a continuing need for capital. The amount of capital required
is most heavily dependent on the rate of the Company's Contract purchases (other
than flow purchases), the required level of initial credit enhancement in
securitizations, and the extent to which previously established Spread Accounts
either release cash to the Company or capture cash from collections on sold
Contracts. The Company plans to adjust its levels of Contract purchases so as to
match anticipated releases of cash from Spread Accounts with capital
requirements for securitization of Contracts that are purchased on an other than
flow basis for the Company's own account. The Company is currently limited in
its ability to purchase contracts on an other than flow basis due to certain
liquidity constraints. As of June 30, 2001, the Company had cash on hand of $3.0
million and available Contract purchase commitments from the revolving note
purchase facility of $7.2 million. The Company's plans to mitigate the current
liquidity situation include the completion of a term securitization that would
provide additional credit availability from the note purchase facility. There
can be no assurance that the Company will be able to complete the term
securitization on favorable economic terms or that the Company will be able to
complete a term securitization at all. If the Company is unable to complete such
securitization, servicing fees and other portfolio related income would continue
to decrease.
12
FORWARD-LOOKING STATEMENTS
This report on Form 10-Q contains certain "forward-looking statements,"
including, without limitation, the statements to the effect that the Company
plans to securitize Contracts in the future. Such plans are dependent on the
Company's ability to conclude transactions with third parties, over which third
parties the Company has no control.
Furthermore, there can be no assurance that the Company will have the
liquidity or capital resources to enable it to post the reserves required for
credit enhancement of such transactions, or that the securitization markets will
be receptive at the time that the Company seeks to engage in such transactions.
In addition to the statements identified above, descriptions of the
Company's business and activities set forth in this report and in other past and
future reports and announcements by the Company may contain forward-looking
statements and assumptions regarding the future activities and results of
operations of the Company. Actual results may be adversely affected by various
factors including the following: increases in unemployment or other changes in
domestic economic conditions which adversely affect the sales of new and used
automobiles and may result in increased delinquencies, foreclosures and losses
on Contracts; adverse economic conditions in geographic areas in which the
Company's business is concentrated; changes in interest rates, adverse changes
in the market for securitized receivables pools, or a substantial lengthening of
the Company's warehousing period, each of which could restrict the Company's
ability to obtain cash for new Contract originations and purchases; increases in
the amounts required to be set aside in Spread Accounts or to be expended for
other forms of credit enhancement to support future securitizations; the
reduction or unavailability of warehouse lines of credit which the Company uses
to accumulate Contracts for securitization transactions; increased competition
from other automobile finance sources; reduction in the number and amount of
acceptable Contracts submitted to the Company by its automobile Dealer network;
changes in government regulations affecting consumer credit; and other economic,
financial and regulatory factors beyond the Company's control.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
INTEREST RATE RISK
Although the Company completed a securitization during the period
ending June 30, 2001, the structure did not lend itself to some of the
strategies the Company has used in the past to minimize interest rate risk as
described below. Specifically, the rate on the Certificates issued is adjustable
and there is no pre-funding component. The Company does intend to issue fixed
rate Certificates and include pre-funding structures for future securitization
transactions, whereby the amount of asset-backed securities issued exceeds the
amount of Contracts initially sold to the Trusts. In pre-funding, the proceeds
from the pre-funded portion are held in an escrow account until the Company
sells the additional Contracts to the Trust in amounts up to the balance of the
pre-funded escrow account. In pre-funded securitizations, the Company locks in
the borrowing costs with respect to the Contracts it subsequently delivers to
the Trust. However, the Company incurs an expense in pre-funded securitizations
equal to the difference between the money market yields earned on the proceeds
held in escrow prior to subsequent delivery of Contracts and the interest rate
paid on the asset-backed securities outstanding, the amount as to which there
can be no assurance. In addition, the Contracts the Company does purchase and
securitize have fixed rates of interest, whereas the Company's interest expense
related to the current note purchase facility is based on a variable rate.
Historically, the Company's securitization facilities had fixed rates of
interest. Therefore, some of the strategies the Company has used in the past to
minimize interest rate risk do not currently apply.
13
The Company is subject to market risks due to fluctuations in interest
rates primarily through its outstanding indebtedness and to a lesser extent its
outstanding interest earning assets, and commitments to enter into new
Contracts. The table below outlines the carrying values and estimated fair
values of such indebtedness:
JUNE 30, DECEMBER 31,
2001 2000
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
FINANCIAL INSTRUMENT VALUE VALUE VALUE VALUE
------------------- -------- -------- -------- --------
(IN THOUSANDS)
Warehouse lines of credit.... $ -- $ -- $ 2,003 $ 2,003
Notes payable ............... 1,986 1,986 2,414 2,414
Senior secured debt ......... 26,000 26,000 38,000 38,000
Subordinated debt ........... 37,158 29,268 37,699 27,709
Related party debt .......... 17,500 13,370 21,500 15,803
Much of the information used to determine fair value is highly
subjective. When applicable, readily available market information has been
utilized. However, for a significant portion of the Company's financial
instruments, active markets do not exist. Therefore, considerable judgments were
required in estimating fair value for certain items. The subjective factors
include, among other things, the estimated timing and amount of cash flows, risk
characteristics, credit quality and interest rates, all of which are subject to
change. Since the fair value is estimated and do not reflect amounts of which
amounts outstanding could be settled by the Company, the amounts that will
actually be realized or paid at settlement or maturity of the instruments could
be significantly different.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The information provided under the caption "Legal Proceedings" in the
Company's annual report on Form 10-K for the year ended December 31, 2000, is
incorporated herein by reference. The following developments have occurred in
the legal proceedings there described:
STANWICH LITIGATION. The Company is currently a defendant in a class
action (the "Stanwich Case"), the plaintiffs in which are entitled to receive
regular payments (the "Settlement Payments") under out-of-court settlements
reached with third party defendants. Stanwich Financial Services Corp.
("Stanwich"), an affiliate of the former chairman of the Company, is the entity
that is obligated to pay the Settlement Payments. Stanwich has defaulted on its
payment obligations to the plaintiffs and has recently filed for reorganization
under Chapter 11 of the United States Bankruptcy Code. The Stanwich case is
pending in the California Superior Court, Los Angeles County, under the name "In
re Structured Settlement Litigation." The Stanwich bankruptcy case was filed on
June 25, 2001 in the Bankruptcy Court for the District of Connecticut. The
plaintiffs in the Stanwich Case have alleged, among other things, that Stanwich
and certain of its current or former officers (including Charles Bradley, Sr.,
the former chairman of the Company, and Charles Bradley, Jr., the president of
the Company), wrongfully used assets of Stanwich to make risky investments,
including loans to Mr. Bradley, Sr., to Mr. Bradley, Jr., to the Company and to
other companies affiliated with Mr. Bradley, Sr., which resulted in the loss of
assets needed to make the Settlement Payments. The plaintiffs and certain other
defendants in the litigation have also alleged that the Company and Stanwich are
alter egos of Mr. Bradley, Sr. and Mr. Bradley, Jr., and that those individuals
used property of Stanwich for their own personal gain and for the gain of the
Company and other entities under their control. Among the acts alleged to be
wrongful are the actions of Stanwich in lending the Company an aggregate of
$20.5 million. The lawsuit seeks, among other things, damages from the Company,
including the return of money borrowed from Stanwich. Since the filing of the
lawsuit, the Company has prepaid to Stanwich $4 million of such indebtedness. In
addition, in connection with the acquisition of Stanwich by a company controlled
by Mr. Bradley, Sr., and certain other transactions, the Company has agreed (or
is alleged to have agreed) to indemnify certain of the other Stanwich Case
defendants against and in respect of certain liabilities, judgments and other
expenses arising out of any act or omission of Stanwich in connection with the
obligations of Stanwich.
14
The Bankruptcy Court has issued an order temporarily restraining any
prosecution of several of the claims in the Stanwich Case against the Company,
Stanwich and certain other defendants. Such order may be rescinded, modified or
made permanent following a hearing in the bankruptcy court that is scheduled for
August 15, 2001. The Company intends to contest vigorously the Stanwich Case and
any claim for indemnity arising therefrom, however, no assurance can be given
that the Company will be successful. The outcome of any litigation is uncertain,
and there is the possibility that damages could be awarded against the Company
in amounts that could be material. It is management's opinion that the
above-described litigation will not have a material adverse affect on the
Company's consolidated financial position, results of operation or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
The annual meeting of shareholders of the Company was held on July 5,
2001. At the meeting, each of the seven nominees to the Board of Directors was
elected for a one-year term by the shareholders, with votes cast as follows:
NOMINEE VOTES FOR VOTES WITHHELD
------- --------- --------------
Charles E. Bradley, Jr. 18,614,837 711,266
Thomas L. Chrystie 18,614,837 711,266
John E. McConnaughy, Jr. 18,614,837 711,266
John G. Poole 18,614,837 711,266
William B. Roberts 18,614,837 711,266
Robert A. Simms 18,614,837 711,266
Daniel S. Wood 18,614,837 711,266
The shareholders also approved each other proposal placed before the
annual meeting. Such proposals were (i) approval of an amendment increasing from
2,500,000 to 3,400,000 the number of shares of common stock issuable pursuant to
awards under the Company's 1997 Long-Term Incentive Stock Plan, and (ii)
ratification of the appointment of KPMG LLP as independent auditors of the
Company for the fiscal year ending December 31, 2001. Votes on such proposals
were cast as follows:
Amendment to Plan Ratification of Selection of
Independent Auditors
For 17,905,258 19,267,363
Against 1,405,845 45,650
Abstain 15,000 13,090
Broker Non-votes 0 0
Total 19,326,103 19,326,103
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) There are no exhibits filed with this report.
(b) During the quarter for which this report is filed, the Company
filed one report on Form 8-K, dated March 31, 2001, which filed as an Exhibit
the Monthly Servicing Report for the March 2001 collection period for CPS Auto
Receivables Trust 1998-4.
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONSUMER PORTFOLIO SERVICES, INC.
(Registrant)
Date: August 9, 2001
/s/ CHARLES E. BRADLEY, JR.
-----------------------------------------------
Charles E. Bradley, Jr.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
(Principal Executive Officer)
Date: August 9, 2001
/s/ DAVID N. KENNEALLY
-----------------------------------------------
David N. Kenneally
SENIOR VICE PRESIDENT-- CHIEF FINANCIAL OFFICER
(Principal Financial and Accounting Officer)
16