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| 1. | What is the current status of the stock repurchase program and management's future plans for the program? | | | During 2000, the Company's Board of Directors authorized the Company to purchase up to $5 million of Company securities. In October 2002, the Board of Directors authorized the purchase of an additional $5 million of outstanding debt or equity securities. In October 2004, the Board of Directors authorized the purchase of an additional $5.0 million of outstanding debt or equity securities. As of December 31, 2007, the Company had purchased $5.0 million in principal amount of the debt securities, and $21.5 million of its common stock, representing 5,417,592 shares. Any such future purchases would depend on the facts available at the time. As a result, we cannot give any useful guidance about possible future purchases. However, the Company will continue to evaluate opportunities to purchase stock, and make such purchases as circumstances allow. |
| 2. | Why does the number of shares outstanding continue to increase even though CPS has been repurchasing shares? | | | As part of its employee long-term incentive plan, first implemented in 1991, the Company awards stock options from time to time. The number of shares outstanding increases as these options are exercised. |
| 3. | Is CPS in contact with any research analysts with the objective of obtaining research coverage? | | | CPS is followed by John Hecht of JMP Securities and Daniel Furtado of Jefferies & Company, Inc. CPS management is also currently in discussions with additional brokerage research analysts to initiate and broaden coverage. Please see Analyst Coverage. |
| 4. | What are your current investor relations efforts? | | | In order to obtain market interest in the Company’s common stock, CPS participates in discussions with the industry, general press and Wall Street participants, and attends industry conferences and seminars. Management of the Company continues to present at equity conferences and plans to continue such efforts. In addition, management is currently in discussions with additional brokerage research analysts to broaden coverage. The Company, however, is limited by strict Securities and Exchange Commission rules and regulations as to what we can say or do. The Company will continue to issue press releases and hold conference calls as circumstances dictate, and will make every effort to maximize shareholder value through the operation of the Company and our investor relations efforts. |
| 5. | What is CPS’s total warehouse credit facility capacity? | | | As of December 31, 2007, CPS has two committed senior warehouse facilities with a total warehouse capacity of $400 million. In addition, the Company has a $70 million residual credit facility that helps reduce the cost of capital that was restructured in July 2008. |
| 6. | I am looking for information related to your delinquencies and net losses, but am having trouble finding it on your website. | | | Certain portfolio performance information, including average annual net losses, delinquencies and static pool net losses, can be found in the Company Summary presentation on the Investors Communications page of the website. Quarterly and year end delinquency and net loss information is available in the Company’s Quarterly Reports and Annual Report on Form 10-Q and Form 10-K, respectively, filed with the Securities and Exchange Commission. |
| 7. | Could you please explain the $17.4 million extraordinary item recorded in your 2002 financial statements? | | | In connection with the acquisition of MFN Financial Corporation, CPS estimated the fair value of the assets acquired and the liabilities assumed at the date of acquisition, March 8, 2002. The Company's analysis indicated that the fair value of net assets acquired totaled $350.33 million, compared to a fair value of liabilities assumed of $209.66 million, yielding net assets acquired of approximately $140.7 million.
Net assets acquired in the transaction of $140.7 million were then compared to the MFN Financial Corporation purchase price of approximately $123.3 million, resulting in an excess of net assets acquired over purchase price, or negative goodwill, of $17.4 million.
Generally accepted accounting principles ("GAAP") effective July 2001, require that negative goodwill be reported as an extraordinary item on the Company's income statement, and as retained earnings in the Company's balance sheet. Such treatment differs from previous years, during which negative goodwill was generally amortized into income.
For further explanation, please refer to Note 2 to Notes to Consolidated Financial Statements in the CPS 2002 Form 10-K.
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| 8. | Could you please explain the $26.4 million tax gain reported in your financial statements for the quarter ended December 31, 2006? | | | In connection with the acquisition of MFN Financial Corporation and The Finance Company, CPS had a fairly significant sized deferred tax asset. You may not have detected the tax asset because it had been almost completely sheltered by a valuation allowance due to our losses during the years 2003 and 2004. However, now that we have been profitable for seven consecutive quarters (since the quarter ended June 30, 2005), we’ve been able to determine that we will continue to be profitable in the future and will be able to use the deferred tax asset. The tax gain therefore is the elimination of a large portion of the valuation allowance.
For further explanation, please refer to Note 11 to Notes to Consolidated Financial Statements in the CPS 2007 Form 10-K.
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| 9. | What impact has the change in the bankruptcy law in October 2005 had on CPS? | | | We found that new bankruptcy filings in 2006 were less than half of historical levels as a percentage of the portfolio. We feel that the change in law has accelerated the timing of losses slightly. Customers that are not able to file are being charged off sooner. However, it is still too early to conclude what kind of lifetime net loss impact this will have. At this time, we feel it will not be significant. |
| 10. | Can I get an auto loan directly from CPS? | | | CPS is primarily an indirect auto finance company and rarely lends money directly to consumers. Generally, we purchase automobile contracts from dealers under several different financing programs |
| 11. | Why haven't any more questions been posted on your website? | | | Consumer Portfolio Services, Inc. reviews questions as received, and posts information to the Q&A section of the Website when it believes such information will provide value to interested parties and is appropriate for posting pursuant to the requirements of the Securities and Exchange Commission. The Company reviews the information posted on the Q&A portion of the website regularly, as well as all questions received. |
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