UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON DC 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported) February 12, 2019

 

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

 

CALIFORNIA   1-11416   33-0459135

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

  

3800 Howard Hughes Pkwy, Suite 1400, Las Vegas, NV 89169
(Address of Principal Executive Offices) (Zip Code)

 

Registrant's telephone number, including area code (949) 753-6800

 

Not Applicable
(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

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

Emerging growth company    ¨

 

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

 

 

     

 

 

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

 

On February 12, 2019, the registrant announced its earnings for the year ended December 31, 2018. A copy of the announcement is attached as an exhibit to this report.

 

   

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

  

One exhibit is included in this report:

 

99.1 News release dated February 12, 2019.

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

  CONSUMER PORTFOLIO SERVICES, INC.
   
Dated: February 19, 2019 By: /s/ JEFFREY P. FRITZ  
 

Jeffrey P. Fritz

Executive Vice President and Chief Financial Officer

Signing on behalf of the registrant

 

 

Exhibit 99.1

 

 

NEWS RELEASE

 

 

 

CPS ANNOUNCES FOURTH QUARTER AND FULL YEAR 2018 EARNINGS

 

§ Pretax income of $4.8 million
§ Net income of $5.4 million, or $0.22 per diluted share, includes a $2.1 million income tax benefit
§ New contract purchases of $252 million, the largest quarterly volume since the second quarter of 2016

 

LAS VEGAS, NV, February 12, 2019 (GlobeNewswire) -- Consumer Portfolio Services, Inc. (Nasdaq: CPSS) (“CPS” or the “Company”) today announced earnings of $5.4 million, or $0.22 per diluted share, for its fourth quarter ended December 31, 2018. This compares to a net loss of $10.0 million, or $0.46 per diluted share, in the fourth quarter of 2017. The results for the fourth quarter of 2018 include a $2.1 million net tax benefit related to certain tax planning strategies and other adjustments. Without the benefit, net income would have been $3.3 million, or $0.13 per diluted share. For the fourth quarter of 2017, the loss includes a non-cash income tax charge of $15.1 million representing the write down of the Company’s deferred tax asset to reflect the lowered tax rates enacted by the December 2017 tax act. Without the charge, net income would have been $5.1 million or $0.20 per diluted share.

 

Revenues for the fourth quarter of 2018 were $91.2 million, a decrease of $16.0 million, or 14.9%, compared to $107.2 million for the fourth quarter of 2017. Total operating expenses for the fourth quarter of 2018 were $86.4 million compared to $99.0 million for the 2017 period. Pretax income for the fourth quarter of 2018 was $4.8 million compared to pretax income of $8.2 million in the fourth quarter of 2017, a decrease of 41.8%.

 

For the twelve months ended December 31, 2018 total revenues were $389.8 million compared to $434.4 million for the twelve months ended December 31, 2017, a decrease of approximately $44.6 million, or 10.3%. Total expenses for the twelve months ended December 31, 2018 were $371.1 million, a decrease of $31.2 million, or 7.8%, compared to $402.3 million for the twelve months ended December 31, 2017. Pretax income for the twelve months ended December 31, 2018 was $18.7 million, compared to $32.1 million for the twelve months ended December 31, 2017. Net income for the twelve months ended December 31, 2018 was $14.9 million compared to $3.8 million for the twelve months ended December 31, 2017. The full-year 2018 results include a $2.1 million net tax benefit related to certain tax planning strategies and other adjustments. Without the benefit, net income for 2018 would have been $12.8, or $0.51 per diluted share. The full-year 2017 results include a non-cash income tax charge of $15.1 million representing the write down of the Company’s deferred tax asset to reflect the lowered tax rates enacted by the December 2017 tax act. Without the charge, net income would have been $18.9 million, or $0.69 per diluted share.

 

During the fourth quarter of 2018, CPS purchased $251.8 million of new contracts compared to $225.2 million during the third quarter of 2018 and $190.8 million during the fourth quarter of 2017. The Company's receivables totaled $2.381 billion as of December 31, 2018, an increase from $2.343 billion as of September 30, 2018 and an increase from $2.334 billion as of December 31, 2017.

 

Annualized net charge-offs for the fourth quarter of 2018 were 7.19% of the average portfolio as compared to 7.24% for the fourth quarter of 2017. Delinquencies greater than 30 days (including repossession inventory) were 13.88% of the total portfolio as of December 31, 2018, as compared to 11.25% as of December 31, 2017.

 

“We are pleased to record our 29 th consecutive quarter of pre-tax earnings,” said Charles E. Bradley, Jr. “In addition, our fourth quarter originations volume of $252 million represented the highest quarterly levels since the second quarter of 2016 and our October 2018-D securitization priced at the tightest weighted average spreads since 2011.”

 

Conference Call

 

CPS announced that it will hold a conference call on Wednesday, February 13, 2019, at 1:00 p.m. ET to discuss its quarterly operating results. Those wishing to participate by telephone may dial-in at 877 312-5502 or 253 237-1131 approximately 10 minutes prior to the scheduled time. The conference identification number is 2286988.

 

 

 

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A replay of the conference call will be available between February 13, 2019 and February 20, 2019, beginning two hours after conclusion of the call, by dialing 855 859-2056 or 404 537-3406 for international participants, with conference identification number 2286988. 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, provision for credit losses and fair value of receivables, because these items are dependent on the Company’s estimates of losses to be incurred. 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

 

 

 

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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,  
    2018     2017     2018     2017  
Revenues:                        
Interest income   $ 88,761     $ 105,100     $ 380,297     $ 424,174  
Other income     2,457       2,125       9,478       10,209  
      91,218       107,225       389,775       434,383  
Expenses:                                
Employee costs     20,030       19,160       79,318       72,967  
General and administrative     8,307       6,482       31,037       26,578  
Interest     26,409       23,704       101,466       92,345  
Provision for credit losses     25,083       43,660       133,080       186,713  
Other expenses     6,605       6,002       26,171       23,709  
      86,434       99,008       371,072       402,312  
Income before income taxes     4,784       8,217       18,703       32,071  
Income tax expense     (568 )     18,168       3,841       28,306  
Net income   $ 5,352     $ (9,951 )   $ 14,862     $ 3,765  
                                 
Earnings per share:                                
Basic   $ 0.24     $ (0.46 )   $ 0.68     $ 0.17  
Diluted   $ 0.22     $ (0.46 )   $ 0.59     $ 0.14  
                                 
                                 
Number of shares used in computing earnings per share:                                
Basic     22,549       21,702       21,989       22,687  
Diluted     24,411       21,702       24,988       27,214  

 

 

  3  

 

 

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

    December 31,     December 31,  
    2018     2017  
Assets:                
Cash and cash equivalents   $ 12,787     $ 12,731  
Restricted cash and equivalents     117,323       111,965  
Total cash and cash equivalents     130,110       124,696  
                 
Finance receivables     1,522,085       2,304,984  
Allowance for finance credit losses     (67,376 )     (109,187 )
Finance receivables, net     1,454,709       2,195,797  
                 
Finance receivables measured at fair value     821,066       –  
Deferred tax assets, net     19,188       32,446  
Other assets     60,607       71,902  
    $ 2,485,680     $ 2,424,841  
                 
Liabilities and Shareholders' Equity:                
Accounts payable and accrued expenses   $ 31,692     $ 28,715  
Warehouse lines of credit     136,847       112,408  
Residual interest financing     39,106       –  
Securitization trust debt     2,063,627       2,083,215  
Subordinated renewable notes     17,290       16,566  
      2,288,562       2,240,904  
                 
Shareholders' equity     197,118       183,937  
    $ 2,485,680     $ 2,424,841  

 

 

 

  4  

 

 

Operating and Performance Data ($ in millions) 

 

    At and for the     At and for the  
    Three months ended     Twelve months ended  
    December 31,     December 31,  
    2018     2017     2018     2017  
                         
Contracts purchased   $ 251.81     $ 190.78     $ 902.40     $ 859.07  
Contracts securitized     245.00       200.00       883.45       870.00  
                                 
Total portfolio balance   $ 2,380.85     $ 2,333.53     $ 2,380.85     $ 2,333.53  
Average portfolio balance     2,371.05       2,339.06       2,341.96       2,334.01  
                                 
Allowance for finance credit losses as % of fin. receivables     4.43%       4.74%                  
                                 
Aggregate allowance as % of fin. receivables (1)     5.91%       5.70%                  
                                 
Delinquencies                                
31+ Days     12.35%       9.81%                  
Repossession Inventory     1.53%       1.44%                  
Total Delinquencies and Repo. Inventory     13.88%       11.25%                  
                                 
Annualized net charge-offs as % of average portfolio     7.19%       7.24%       7.74%       7.68%  
                                 
Recovery rates (2)     33.0%       34.7%       34.1%       35.1%  

 

 

    For the     For the  
    Three months ended     Twelve months ended  
    December 31,     December 31,  
    2018     2017     2018     2017  
    $ (3)     %(4)     $ (3)     %(4)     $ (3)     %(4)     $ (3)     %(4)  
Interest income   $ 88.76       15.0%     $ 105.10       18.0%     $ 380.30       16.2%     $ 424.17       18.2%  
Servicing fees and other income     2.46       0.4%       2.13       0.4%       9.48       0.4%       10.21       0.4%  
Interest expense     (26.41 )     -4.5%       (23.70 )     -4.1%       (101.47 )     -4.3%       (92.35 )     -4.0%  
Net interest margin     64.81       10.9%       83.52       14.3%       288.31       12.3%       342.04       14.7%  
Provision for credit losses     (25.08 )     -4.2%       (43.66 )     -7.5%       (133.08 )     -5.7%       (186.71 )     -8.0%  
Risk adjusted margin     39.73       6.7%       39.86       6.8%       155.23       6.6%       155.33       6.7%  
Core operating expenses     (34.94 )     -5.9%       (31.64 )     -5.4%       (136.53 )     -5.8%       (123.25 )     -5.3%  
Pre-tax income   $ 4.78       0.8%     $ 8.22       1.4%     $ 18.70       0.8%     $ 32.07       1.4%  

 

 

(1) Includes allowance for finance credit losses and allowance for repossession inventory.
(2) Wholesale auction liquidation amounts (net of expenses) as a percentage of the account balance at the time of sale.
(3) Numbers may not add due to rounding.
(4) Annualized percentage of the average portfolio balance.  Percentages may not add due to rounding.