Auto Credit Express Blog
April 13, 2008
Analyzing CPS Fourth Quarter and Full-Year Earnings 2007
On February 12th, CPS disclosed their earnings for the fourth quarter and all of 2007. Unlike AmeriCredit, there was good news and unlike many subprime auto lenders, CPS did not appear to pull back in the fourth quarter of 2007…
2007 Income and Revenue
Pre-tax income for the fourth quarter of 2007 was $6.0 million compared to $4.5 million in 2006. Net income for the fourth quarter of 2007 was $3.5 million versus $2.7 million for 2006.
Total revenue for the fourth quarter of 2007 was $109.5 million compared to $79.9 million in 2006. Total operating expenses for the fourth quarter of 2007 were $103.5 million versus $75.4 million for 2006.
Pre-tax income for the full year 2007 was $24.0 million compared to $13.2 million in 2006. Net income for the full year 2007 was $13.9 million versus $7.8 million for 2006.
Total revenue for the full year 2007 was $394.6 million compared to $278.9 million in 2006. Total operating expenses for the full year 2007 were $370.6 million versus $265.7 million for 2006.
Contracts purchased
While the dollar amount of contracts purchased increased from 2006 to 2007 from $1019.0 in 2006 to $1282.3 million in 2007, the dollar amount quarter to quarter actually fell from the third quarter of 2007 ($340.2 million) to $265.8 million for the fourth quarter, although this was still above the fourth quarter of 2006 ($241.4 million).
Charge-offs
Charge-offs are always a concern for subprime lenders. In this regard, CPS seems to be having the same issues as other lenders with annualized net charge-offs during the December 2007 quarter of 6.3% of the average owned portfolio as compared to 5.9% during the 2006 quarter. Annualized net charge-offs for the full year 2007 were 5.3% of the average owned portfolio as compared to 4.5% for the full year 2006. Delinquencies greater than 30 days (including repossession inventory) were 6.3% of the total owned portfolio as of December 31, 2007, as compared to 5.5% as of December 31, 2006.
The Bottom Line
CPS appears to be in much better shape than many other subprime lenders, although the rise in delinquencies will probably cause them to tighten up their lending guidelines in 2008.
