Auto Credit Express Blog
October 31, 2008
CPS Reports Third Quarter Loss Amid Credit Crunch
This week, Irvine, California-based Consumer Portfolio Services reported its financial results for the third quarter.
Bottom line impacted by structured loan sale
Here at Auto Credit Express, we know that just as the current economy has played havoc with the bottom lines of traditional banks, so, too, has it affected the profit picture of most subprime auto lenders. A case in point is Consumer Portfolio Services.
Through the second quarter, CPS had managed to earn a profit for its inventors. But that all changed when the company was forced to sell a portion of its receivables for less than their booked value in order to raise some much-needed operating capital. That turned a year-to-date profit of $3.6 million in June to a year-to-date loss of $2.7 million in September.
Here is the news release:
IRVINE, CA, Oct 28, 2008 – Consumer Portfolio Services, Inc. (NASDAQ: CPSS) (”CPS” or the “Company”) today announced results for its third quarter ended September 30, 2008.
Total revenues for the third quarter of 2008 decreased approximately $11.1 million, or 10.8%, to $91.7 million, compared to $102.8 million for the third quarter of 2007. Total operating expenses for the third quarter of 2008 were $104.4 million, an increase of $7.9 million, or 8.2%, as compared to $96.4 million for the 2007 period.
Net loss for the third quarter of 2008 was $(6.3) million, or $(0.32) per diluted share, compared to net income of $3.7 million, or $0.16 per diluted share, for the year-ago quarter. The financial results for the third quarter of 2008 were negatively impacted by the completion of the previously announced structured whole loan sale in September 2008. The Company incurred a loss on the transaction as the effective purchase price of the sold receivables was less than the carrying value on the Company’s balance sheet.
For the nine months ended September 30, 2008, total revenues increased approximately $8.8 million, or 3.1%, to $293.8 million, compared to $285.0 million for the nine months ended September 30, 2007. Total expenses for the nine months ended September 30, 2008 were $300.0 million, an increase of $32.9 million, or 12.3%, as compared to $267.1 million for the nine months ended September 30, 2007.
Net loss for the nine months ended September 30, 2008 was $(2.7) million, or $(0.14) per diluted share, compared to net income of $10.4 million, or $0.45 per diluted share, for the nine months ended September 30, 2007. As discussed above, the financial results for the third quarter of 2008 were negatively impacted by the completion of the previously announced structured whole loan sale in September 2008.
During the third quarter of 2008, CPS purchased $33.6 million of contracts from dealers as compared to $79.8 million during the second quarter of 2008 and $340.2 million during the third quarter of 2007. During the first nine months of 2008, CPS purchased $289.6 million of contracts from dealers as compared to $1,016.5 million during the first nine months of 2007. The Company’s managed receivables totaled $1,829.5 million as of September 30, 2008, as compared to $2,053.1 million as of September 30, 2007, as follows ($ in millions):
As previously reported, in September 2008 the Company completed a structured whole loan sale with the sale of $199 million of automobile purchase receivables. In addition, the Company extended the maturity of one of its warehouse credit facilities from September 30, 2008 to November 28, 2008.
Annualized net charge-offs during the first nine months of 2008 were 7.2% of the average owned portfolio as compared to 5.0% during the same period in 2007. Delinquencies greater than 30 days (including repossession inventory) were 7.7% of the total owned portfolio as of September 30, 2008, as compared to 6.1% as of September 30, 2007. The increase in net charge-off and delinquency percentages can be partly attributed to the aging of the portfolio and the decrease in the size of the managed portfolio as new contract purchases have not replaced portfolio run-off.
“While the completion of the whole loan sale negatively impacted our earnings, the quality of our franchise allowed us to access liquidity during this very difficult capital markets environment,” said Charles E. Bradley, Jr., Chief Executive Officer. “We expect the operating landscape to be challenging in the near term and have made adjustments to our business accordingly. We have scaled back our operating infrastructure to focus on servicing our portfolio and maximizing collections while maintaining our best dealer relationships. With these moves, we feel confident in our ability to weather the current economic turbulence and should be well positioned to exploit a tremendous industry opportunity once the capital markets stabilize.”
