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Consumer Portfolio Services Inc. Reports Operating Results (10-Q)

November 12, 2010 | About:
10qk

10qk

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Consumer Portfolio Services Inc. (CPSS) filed Quarterly Report for the period ended 2010-09-30.

Consumer Portfolio Services Inc. has a market cap of $13.8 million; its shares were traded at around $0.8 with and P/S ratio of 0.1. Consumer Portfolio Services Inc. had an annual average earning growth of 52.1% over the past 5 years.CPSS is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Revenues. During the three months ended September 30, 2010, revenues were $36.8 million, a decrease of $16.0 million, or 30.3%, from the prior year revenue of $52.8 million. The primary reason for the decrease in revenues is a decrease in interest income. Interest income for the three months ended September 30, 2010 decreased $16.4 million, or 33.2%, to $32.9 million from $49.3 million in the prior year. The primary reason for the decrease in interest income is the decrease in finance receivables held by consolidated subsidiaries. In September 2010 we took advantage of the more recent improvement in the market for asset-backed securities by re-securitizing the underlying receivables from our unrated September 2008 securitization. By doing so we were able to pay off the bonds associated with the September 2008 securitization including a senior bond that we owned since inception of that transaction. We recorded interest income on that senior bond of $32,000 and $84,000 during the three months ended September 30, 2010 and 2009, respectively. We hold a residual interest in the September 2010 securitization that is similar to the structure and economics of the original 2008 securitization.

At September 30, 2010, we were generating income and fees on a managed portfolio with an outstanding principal balance of $843.0 million (this amount includes $95.8 million of automobile contracts on which we earn servicing fees and a residual interest and also includes another $89.6 million of automobile contracts on which we earn servicing fees and own a note collateralized by such contracts), compared to a managed portfolio with an outstanding principal balance of $1,197.3 million as of September 30, 2009. At September 30, 2010 and 2009, the managed portfolio composition was as follows:

Interest expense for the three months ended September 30, 2010 decreased $6.1 million, or 23.4%, to $20.1 million, compared to $26.2 million in the previous year. The decrease is primarily the result of changes in the amount and composition of debt carried on our consolidated balance sheet. Interest on securitization trust debt decreased by $7.8 million in the three months ended September 30, 2010 compared to the prior year. For the current period, interest on securitization trust debt includes $723,000 in interest expense on our $50 million term funding facility that was established in March 2010 and had an outstanding balance of $31.7 million at September 30, 2010. Interest expense on senior secured and subordinated debt increased by $406,000, and interest expense on residual interest financing decreased $221,000 in the three months ended September 30, 2010 compared to the prior year. Interest expense on warehouse debt increased by $1.5 million for the three months ended September 30, 2010 compared to the prior year as a result of our increased contract purchases in 2010. We have increased our borrowings on the $50 million credit facility established in September 2009 to provide funding for these purchases. As of September 30, 2010, it had an outstanding balance of $39.7 million. In the prior period, we had just established the $50 million credit facility which had an outstanding balance equal to $5.2 million as of September 30, 2009.

Marketing expenses consist primarily of commission-based compensation paid to our employee marketing representatives. Our marketing representatives earn a salary plus commissions based on our volume of contract purchases and sales of training programs, lead sales, and direct mail products that we offer our dealers. Marketing expenses increased by $172,000, or 19.2%, to $1.1 million, compared to $896,000 in the previous year, and represented 2.7% of total operating expenses. As a result of our $50 million term funding facility and our $50 million credit facility we were able to purchase 2,359 contracts representing $35.2 million in principal balances in the current period compared to 37 contracts representing $506,000 in principal balances in the prior year.

Revenues. During the nine months ended September 30, 2010, revenues were $119.9 million, a decrease of $57.3 million, or 32.3%, from the prior year revenue of $177.2 million. The primary reason for the decrease in revenues is a decrease in interest income. Interest income for the nine months ended September 30, 2010 decreased $58.4 million, or 35.3%, to $107.1 million from $165.5 million in the prior year. The primary reason for the decrease in interest income is the decrease in finance receivables held by consolidated subsidiaries. In September 2010 we took advantage of the more recent improvement in the market for asset-backed securities by re-securitizing the underlying receivables from our unrated September 2008 securitization. By doing so we were able to pay off the bonds associated with the September 2008 securitization including a senior bond that we owned since inception of that transaction. We recorded interest income on that senior bond of $149,000 and $289,000 during the three months ended September 30, 2010 and 2009, respectively. We hold a residual interest in the September 2010 securitization that is similar to the structure and economics of the original 2008 securitization.

At September 30, 2010, we were generating income and fees on a managed portfolio with an outstanding principal balance of $843.0 million (this amount includes $95.8 million of automobile contracts on which we earn servicing fees and own a residual interest and another $89.6 million of automobile contracts on which we earn servicing fees and own a note collateralized by such contracts), compared to a managed portfolio with an outstanding principal balance of $1,197.3 million as of September 30, 2009. At September 30, 2010 and 2009, the managed portfolio composition was as follows:

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