Consumer Portfolio Services, Inc. Reports 2004 Third Quarter Results
IRVINE, Calif.--Nov. 1, 20045, 2004--Consumer Portfolio Services, Inc. today announced results for its third quarter ended September 30, 2004.For the three months ended September 30, 2004 total revenues increased approximately $6.2 million, or 24%, to $32.3 million, compared to $26.0 million for the three months ended September 30, 2003. Pretax loss for the third quarter of 2004 was $2.1 million, compared to pretax loss of $2.9 million for the comparable 2003 period. Expenses for the third quarter of 2004 included a $7.6 million provision for credit losses vs. $4.2 million during the third quarter of 2003. Net loss for the quarter ended September 30, 2004 was $2.1 million, or $(0.10) per diluted share, compared to net loss of $2.9 million, or $(0.14) per diluted share, for the quarter ended September 30, 2003. Diluted shares outstanding were 21.3 million and 20.2 million for the quarters ended September 30, 2004 and 2003, respectively.
Revenues for the nine months ended September 30, 2004 totaled $92.5 million, an increase of $19.2 million, or 26%, compared to $73.3 million in the 2003 period. For the nine months ended September 30, 2004 pretax loss was $3.6 million. For the nine months ended September 30, 2003 pretax income was $2.6 million. Net loss for the nine months ended September 30, 2004 was $3.6 million, or $(0.17) per diluted share, compared to net income of $6.1 million, or $0.28 per diluted share, for the nine months ended September 30, 2003. Net income during the 2003 period included a net tax benefit of $3.4 million. The income tax benefit in the prior period was primarily the result of the resolution of certain IRS examinations of tax returns filed by MFN Financial Corporation prior to its having been acquired in 2002 by CPS. The resulting tax benefit of $4.9 million was offset in part by an income tax provision of $1.5 million. Diluted shares outstanding were 21.0 million and 21.7 million for the nine-month periods ended September 30, 2004 and 2003, respectively.
"While revenues during the quarter remained essentially flat from last quarter, we are pleased with our continued operational progress," said Charles E. Bradley, President and Chief Executive Officer of Consumer Portfolio Services. "Purchases of new receivables for the quarter were the highest they have been in more than two years. Subsequent to the end of the quarter, we have retained a new external auditor, McGladrey & Pullen, LLP, to begin with the year-end audit. While we continue to have a good working relationship with our current auditors, KPMG LLP, we felt McGladrey's focus on middle market companies would be more cost-efficient going forward."
During the third quarter of 2004, the Company purchased $119.3 million of contracts from dealers and completed two securitization financings. The two securitizations were the sale of $87.7 million of AAA/Aaa rated asset backed notes issued by CPS Auto Receivables Trust 2004-B and the sale of $91.0 million of AAA/Aaa asset backed notes issued by CPS Auto Receivables Trust 2004-C. Both transactions were securitizations of receivables originated under CPS's programs. As of September 30, 2004, Consumer Portfolio Services' managed receivables totaled $898.3 million as follows ($ in millions):
Owned by Consolidated Subsidiaries(*) $553.9
Owned by Non-Consolidated Subsidiaries 276.2
As Third Party Servicer for SeaWest Financial 68.2
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Total $898.3
(*) Before $55.2 million of allowance for credit losses and deferred
acquisition fees.
As previously reported, in order to increase transparency of the Company's financial reports, in the third quarter of 2003 Consumer Portfolio Services began structuring its securitization transactions as secured financings, with receivables and associated debt remaining on the balance sheet, and without recognition of a gain on sale. Accordingly, net earnings will be recognized over the life of the receivables as interest income and fee income, less related funding costs and a provision for losses. Such loan loss provisions are recorded upon acquisition and during the life of the receivables. The effect is to accelerate recognition of expenses and defer recognition of revenue. As a result, reported earnings initially were less than what they would have been had the Company continued to structure its securitizations to record a gain on sale.
Conference Call
Consumer Portfolio Services announced that it will hold a conference call Tuesday, November 16, 2004, at 1:30 p.m. EST to discuss its quarterly results. Those wishing to participate by telephone may dial in at 973-409-9261 approximately 10 minutes prior to the scheduled time.
A replay will be available between November 16, 2004 and November 23, 2004, beginning one hour after conclusion of the call, by dialing 877-519-4471, reservation number is 5405114. A broadcast of the conference call will also be available live and for 30 days after the call via the Company's web site at www.consumerportfolio.com and at www.streetevents.com.
About Consumer Portfolio Services, Inc.
Consumer Portfolio Services, Inc. is a consumer finance company that specializes in purchasing, selling and servicing retail automobile installment sale contracts originated by automobile dealers located throughout the United States. The Company is currently active in 38 states. Through its purchase of contracts, the Company provides indirect financing to car 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.
Forward-looking statements in this news release include the Company's recorded revenue, expense, gain on sale revenue and provision for credit losses because these items are dependent on the Company's estimates of future 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 or changes in bankruptcy law, 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.
The statements concerning the intended structure of future securitizations and the effects of such structures on financial items are forward-looking statements. If the Company were to change the structure of future transactions, that could cause such forward-looking statements not to be accurate.
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 gain on sale and 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 Nine months ended
September 30, September 30,
----------------------- ------------------
2004 2003 2004 2003
------------ --------- --------- -------
Revenues:
Net gain on sale of
contracts $- $- $- $8,664
Interest income 25,314 15,835 71,458 36,605
Servicing fees 3,031 4,295 9,864 13,361
Other income 3,918 5,911 11,151 14,674
------------ --------- --------- -------
32,263 26,041 92,473 73,304
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Expenses:
Employee costs 9,905 9,491 29,352 27,380
General and
administrative 4,785 6,050 15,220 14,131
Interest 8,388 6,427 21,800 17,044
Provision for credit
losses 7,560 4,190 20,610 4,190
Other expenses 3,686 2,735 9,133 7,925
------------ --------- --------- -------
34,324 28,893 96,115 70,670
------------ --------- --------- -------
Income (loss) before
income tax benefit (2,061) (2,852) (3,642) 2,634
Income tax expense
benefit - - - (3,434)
------------ --------- --------- -------
Net income (loss) $(2,061) $(2,852) $(3,642) $6,068
============ ========= ========= =======
Earnings (loss) per share:
Basic $(0.10) $(0.14) $(0.17) $0.30
Diluted (0.10) (0.14) (0.17) 0.28
Number of shares used in
computing earnings (loss)
per share:
Basic 21,345 20,200 21,001 20,226
Diluted 21,345 20,200 21,001 21,711
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
September 30, December 31,
2004 2003
----------------------------
Cash and restricted cash $124,768 $100,486
Finance receivables, net 485,922 266,189
Residual interest in securitizations 68,714 111,702
Other assets 26,422 14,093
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$705,826 $492,470
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Accounts payable and other liabilities $29,014 $29,018
Warehouse lines of credit 16,521 33,709
Residual interest financing 27,311 -
Securitization trust debt 477,891 245,118
Senior secured debt 59,829 49,965
Subordinated debt 15,000 52,500
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625,566 410,310
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Shareholders' equity 80,260 82,160
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$705,826 $492,470
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