Consumer Portfolio's CEO Discusses Q4 2013 Results - Earnings Call Transcript

Feb.11.14 | About: Consumer Portfolio (CPSS)

Consumer Portfolio Services, Inc. (NASDAQ:CPSS)

Q4 2013 Earnings Conference Call

February 11, 2014 01:00 p.m. ET

Executives

Charles E. Bradley – Chairman, CEO and President

Jeffrey P. Fritz – CFO, Principal Accounting Officer and SVP

Robert E. Riedl – CIO and SVP

Analysts

David M. Scharf – JMP Securities LLC, Research Division

Kirk Ludtke - CRT Capital Group LLC, Research Division

Operator

Good day everyone, and welcome to the Consumer Portfolio Services 2013 Fourth Quarter Operating Results Conference Call. Today's call is being recorded.

Before we begin, management has asked me to inform you that this conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements.

Such forward-looking statements are subject to certain risk that could cause actual results to differ materially from those projected. I refer you to the company's SEC filings for further clarification. The company assumes no obligation to update publicly any forward-looking statements, where as a result of new information, future events or otherwise.

With us here now, is Mr. Charles Bradley, Chief Executive Officer; Mr. Jeff Fritz, Chief Financial Officer; and Mr. Robert Riedl, Chief Investment Officer of Consumer Portfolio Services. I'd like to turn the call over to Mr. Bradley.

Charles E. Bradley

Thank you, and welcome everyone to the fourth quarter 2013 and year end 2013 conference call. I think it’s safe to say we’re very happy with our quarter, we’re very happy with the year overall. Pretax earnings were $11.5 million versus $4.6 million last year. So obviously that’s a really good number. Overall for the year $37.2 million versus $9.2 million in 2012. It is almost easy enough to say that numbers speak for themselves. We managed to accomplish in 2013 probably just about everything we could possibly have wanted to or hoped to accomplish. Portfolio grew to $1.2 billion, little over $1.2 billion up from little less than $900 million. So, we are out where we are getting the growth in the portfolio we expect. Monthly originations grew into the low 70s from the high 40s and again so we are getting that monthly growth as well.

I think we mentioned it many times our goal is to get back to $125 million a month to get over $2 billion portfolio and have those earnings track along those lines. I think we are well on that plan. Everything is going as planned and so I think looking forward 2014, it looks real good but we will go more into that after I let Jeff and Robert go through the financials.

Jeffrey P. Fritz

Thanks, Brad. Welcome, everybody. Beginning with the revenues. Revenues for the fourth quarter were $66.6 million, that's a 4% increase over $64.1 million for our third quarter and 32% increase over the fourth quarter of 2012. The full year revenues were $255.8 million which is a 37% increase over $187.2 million for the full year of 2012. No surprises here. Revenue is driven by the growth in the portfolio which was aided by $173 million on originations for the fourth quarter and $764 million in new receivables for all of 2013 and that led to growth in the consolidated portfolio of 8% for the quarter and 21% for the full year.

Looking now to the expenses, $55.1 million for the fourth quarter that’s an increase of 3% over the third quarter of 2013 and an increase of 20% over $46 million for the fourth quarter of 2012. Year-to-date expenses is $218.6 million, 23% increase over $178 million for the full year of 2012. We have seen a continued trend of decreases in interest expense in one of our major expenses due to the continued run-off of higher cost ABS and then subsequently being replaced by lower cost financing ABS structures and the other expenses operating expenses and G&A have had modest increases but they have been somewhat offset by those decreases in the interest expense. In the case of fourth quarter, we benefited from one little bit of an unusual $1.8 million reduction in our accrual for contingent liabilities.

Moving on to the loss provision for the quarter $24.1 million, a 19% increase over the $20.2 million for the third quarter and 110% increase over $11.5 million for the fourth quarter of 2012. Year-to-date provision for loan losses is $76.9 million and that’s a 130% increase over $33.5 million for the full year 2012. Those numbers are in line with our expectations, portfolio is continuing to grow. It's a 51% increase over the prior year end of 2012 and the portfolio is seasoning just a little bit as the volume of new originations becomes a little bit less than the percentage of portfolio that’s already on the balance sheet.

Pretax earnings for the quarter, $11.5 million, that’s an 8% increase compared to $10.6 million for the third quarter and 150% increase of our pretax earnings for the fourth quarter of 2012. Year-to-date pretax earnings $37.2 million that’s 304% increase over $9.2 million for the full year of 2012.

The net income for the quarter is $6.5 million, 10% increase over $5.9 million for the third quarter of this year and well technically a decrease compared to $64.8 million net income for the fourth quarter of last year, you will recall that in the fourth quarter of last year, we reversed the valuation allowance on our deferred tax assets which lead to a sort of a onetime $60.2 million tax benefit which ripple through the net income numbers for last year. So similarly, for the full year, $21 million in our net income for 2013 technically a decrease compared to the $69.4 million that we had for all of 2012 again with the huge tax benefit.

Diluted earnings per share $0.21 for the quarter, that's an 11% increase over $0.19 for the third quarter this year and the apparent decrease compared to $2.20 for the fourth quarter of last year again last year with the big tax benefit. Year-to-date net diluted earnings per share $0.67 compared to the much larger $2.72 reflecting the tax benefit for last year.

Moving on to the balance sheet, unrestricted cash balance is $22 million at the end of the year compared to $24 million in the third quarter of this year and up significantly from $13 million last year. Restricted cash balance is running more or less consistent, $132 million at the end of the year compared to $129 million in the third quarter and $104 million last year. The couple of trends we have seen, our ABS structure provide a high degree of leverage and so we have been growing our cash balances pretty steadily throughout the year and another note as always we have significant portion of our restricted cash balance at the end of the year, $63.4 million which represents pre fund proceeds for our 13D securitization.

Also in the balance sheet, net finance receivable $1.1 billion, that’s 7% increase over $1 billion in the third quarter and 50% increase over $745 million at the end of the year last year. Again those on balance sheet receivables benefited greatly from $764 million of origination throughout 2013. Fireside portfolio that small side value portfolio continues to decline down to $14 million at the end of the year. No surprises on the debt side of the balance sheet. Warehouse line utilization has tried to down a little bit as I mentioned our cash balances have continued to grow and our securitization debt going out to $1.2 billion at the end of the year compared to $1.1 billion in the third quarter and $792 million at the end of the year last year.

Moving on, if we look at some of the performance metrics for the period, our net interest margin was $53.3 million for the quarter that’s up 6% from $50.2 million in the third quarter of this year and up 62% compared to the fourth quarter of 2012. Full year net interest margin $186.7 million that’s 73% increase over $107.8 million for the full year 2012. Again, we have alluded to our interest costs have trended down due to the improved cost of funds and ABS financing and also our higher cash balances as I mentioned before have provided us an opportunity to utilize our revolving warehouse lines somewhat less than we might otherwise have done.

The risk adjusted net interest margin for the quarter $29.1 million, that’s a slight decrease compared to $30 million for the third quarter this year and an increase of $21.4 million compared to the fourth quarter of last year. The full year risk adjusted NIM $109.8 million, 48% increase over $74.3 million for the full year of 2012. We have had as we already discussed, improvements in the net interest margin, the NIM is somewhat affected by some seasonal expectations and adjustment to the provision for loan losses that we see generally this time of year.

Core operating expenses for the quarter $19.4 million that’s really flat compared to the third quarter of this year and an increase of about 15% compared to $16.8 million in the fourth quarter of last year. Full year co-operating expenses $75.7 million for 2013, 16% increase over $65.1 million for the full year 2012. We have done a good job of controlling our operating costs in light of the continued growth to the portfolio. Looking at those numbers now core operating expenses as a percentage of the average managed portfolio, 6.4% for this fourth quarter, that’s an improvement to 7% compared to 6.9% for the third quarter of this year and again a significant improvement to 16% at better than 7.6% for the fourth quarter of last year. The annualized core operating expense ratio, 7% for this year again significant improvement 11% less than 7.9% for the full year of 2012. So with our steady portfolio growth and control of operating expenses you can see that we have improved our operating leverage pretty consistently.

Finally to return on managed assets, as a percent, the return on managed assets for the quarter 3.8% that’s a slight increase over 3.7% for the third quarter this year and a significant increase 81% over the fourth quarter of 2012 and the full year return on managed assets 3.4% again a significant improvement over 1.1% for the full year of 2012.

And with that I will turn it over to Robert Riedl.

Robert E. Riedl

Thanks, Jeff. Starting with asset performance metrics, delinquencies for the quarter were about 6.9% compared to 6.4% at the September quarter and about 5.6% a year ago. We have seen a little bit of seasonal uptick versus September which we would have expected and year-over-year increases that we have talked about as our larger vintages from 2012 and 2013 are seeing slightly higher credit losses are coming more into the portfolio and seasoning further.

Net losses for the quarter were about 5.6% annualized compared to 4.9% for the September quarter and 4% year-over-year similar expectations there with seasoning of the 2012 and 2013 vintages. For the year, annualized net losses were 4.7% compared to 3.6% last year. At the auction, we saw pretty steady quarter, 45.4% liquidation percentages versus 45.4% in September, slight downturn versus 46.8% a year ago. I think looking out in terms of what we expect for auction values going forward, we would expect some seasonal improvement coming up, but over the next 12-24 months probably the little bit of weakening giving higher production in the last few years and more off-lease vehicles coming in, but nothing dramatic.

On the capital market side of the things, we did our fourth deal securitization deal in December. There is $183 million deal. Very similar to our September transaction, five tranches rated by S& and Moody’s, double A down to single B for a blended coupon in the 280s and that was an improvement of about 25 basis points from the September deal and we saw that the market had improved a little bit and got slightly better execution.

As Jeff mentioned, we had similar pre funding component that we have had over the course of last two or three years. $63 million that we used for funding of December's originations and so far this year, the ABS market looks very strong, there has been at least a half of dozen auto and subprime deals where execution has been better than the fourth quarter.

One of our objectives for this year is hopefully as we continue to show improving profitability and deleveraging on the corporate debt side is to try to get our senior tranche to AAA level. I think there is a good probability of that we will continue working with the agencies to try to push them there.

From a liquidity standpoint, Jeff mentioned that a couple of times, we have had continuing improvements in cash balances at the end of the fourth quarter, we had $22 million in unrestricted cash as Jeff mentioned, but we could have created about another $38 million to give us a total of over $60 million of available liquidity. And we will use that this year to continue repaying our corporate debt and in fact we paid $10 million of our senior secure debt at the end of January and would expect to pay the remainder of that by the middle of the year.

With that let me turn it back to Brad.

Charles E. Bradley

Okay. In terms of looking operations, marketing continues to be one of our focuses as I mentioned in previous calls, our goal is to keep expanding the marketing rep force. We went from 78 or less last year to 100 this year. Our goal currently is to get to 140 which would be right about where we were probably the max last time around. So that all seems to be going very well. There seems to be lots of sort of untapped areas, geographically still across the country which is good for our growth and expansion plans.

Originations, one of the things we did, we started doing last year last year and continued to do this year as we staffed up ahead of time originations which allows us to get tremendous dealer attention and response as we can grow each year. So it worked up brilliantly last year. We will expect it to be very helpful this year. One of the things lots of friendly competitors do is they grow, this is the time to grow, this is the season. And to extending our properly staffed, then it's very hard to handle growth both in terms of originations and also then in terms of collections.

We obviously have our experience in this area and we have done a lot to really sort of excel in this niche. And I think some of the other friendly competitors could have some problems because it's a little bit advantage with the dealers, it did last year, we would expect the same this year.

In terms of collections, we continue to work on improving the collections both the general performance, the attention of the customers, basically overall everything. And that looks like it should have starting to pay dividends. So we are very pleased with how that’s operating as well. Again we continue to expand. We have actually lowered the account loads a little bit probably in anticipation of the growth we should see coming up in the next quarter.

As Robert mentioned, going forward this year, returning the rest of the debt is important to us. We have paid $10 million. We should pay out the rest of the remaining debt over the next couple of months. And that will get us in a very strong position on our balance sheet. We saw that lots of cash. The markets are still being quite kind in terms of the leverage and the liquidity we are being able to generate in our deals.

Looking at the industry, lots of competitors, it's finally time where I can say we have been able to see some of the competition out there and I think mostly in the fourth quarter, generally speaking the fourth quarter is not a time where company’s growth certainly we never do. It's Christmas time, people are using the money for their things. Interesting enough we saw lots of the competitors grow or try and grow a lot. That put together a bunch of competition for the fourth quarter. I think lot of people are sort of put out some expectations of what they deliver in the fourth quarter since we don’t do that or didn’t do that for some big growth in the fourth quarter, we weren’t sort of caught up on that whirlwind but in fact we did see the competition in the fourth quarter.

We don’t think that really affects us. A lot of it is either sort of bigger companies that sort of need to make a statement or smaller companies looking for sort of get the total in the industry. Again the fourth quarter is probably not the quarter for people who are trying to do that. So it's little interesting to watch. What's sort of interesting now is we are in the growth period and we fact are seeing lots of growth significant. Lot of competition already, possible competition we might have thought that would slow down a little bit. So far it comes early, it comes later this year, because like last year, they keep pushing back to filing for tax returns. Last year was the middle of January. This year was the last of January.

And so the season moves out just a little bit but we are pleasantly surprised to see that operated up 35% so we are looking for another big growth quarter coming up even with the competition out there. So it will be interesting to see what else is doing as we go forward.

And looking at the industry, Wall Street still is performing wonderfully strong as Robert mentioned. There is lots of money out there. They want to buy these deals. They have lot more faith in auto and so the execution is very good. Even though we think it will trend up a little bit this year we don’t see trending up particularly a lot. And as longer it stays there, we grow obviously the more loans we can put on books at a very good margin.

We have been able to hang on our APR at over 20%. We have been giving up this kind of little by little as we go and so that that plan has also worked very well for us. Getting one probably [Indiscernible] public that was another part that I think is speaks very highly for the industry. It was a massively oversold deal. The up sized it and we are now operating well and I think that puts a little bit of spotlight on our industry in terms of where these companies can go and may have also somebody do with the fourth quarter and people are sort of rushing to get things done. It’s started to sell for us but we also attended the NADA conference in mid January. We are pleased to see that the dealers are actively pursuing companies like ourselves to expand on lending abilities.

We had just as much or stronger interest [Indiscernible] we ever have and so I think that again builds well for the future. So looking at the overall economy and we can have most of everyone, it's hard to find somebody who doesn’t think the economy is doing at least pretty good and that this year it should perform pretty well. So without worrying too much all about like I said, unemployment not going up. And we don’t think it is as long as there is growth in the industry at GMP which appears there is, it doesn’t necessarily have to be super strong and unemployment doesn’t [Indiscernible] to go down. But just generally staying the same as sort of the perfect scenario for us to operate in for 2014. So we think moving with our luck 2014 looks at least from a big picture the same as 2013 and that should be a good environment for us to operate in. with that we will open up for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Kyle Joseph from [Indiscernible].

Unidentified Analyst

Thanks for taking my question. You guys commented a little bit on competition and how heated up in the fourth quarter and that sort of rationalized as far in the first quarter or have you seen anything different thus far?

Charles E. Bradley

No, I think it probably has rationalized because it was competitive in the fourth quarter and again if you think about it general business is down in the fourth quarter and competition heats up, it looks much more heated than it may be really is. Now [Indiscernible] growth quarters, the competition doesn’t look nearly so heated because certainly we are getting plenty of growth. So I think it’s probably rationalized is probably a good word. It would be interesting to see how it grows but certainly it doesn’t seem like people are reaching nearly as hard at all as they were in the fourth quarter.

Unidentified Analyst

Alright. And that competition is it new players or just existing players with a lot of liquidity looking to put money to work?

Jeffrey P. Fritz

I think it's it’s combination of both, the little players just probably aren’t big enough to be more than [Indiscernible] in some geographic regions. I think the big player they are sort of still looking to maybe follow, they are the ones that are going forward little strongly. We will see how that turns out for them but either way I think we did – we would be able to expand and grow pretty much as we want anyway. We may not grow 50% a year over year but we are going to be big enough so we don’t really need to.

Unidentified Analyst

Right. And then switching over to credit so I mean delinquencies and charge -- doesn’t inline with your expectations I think you said but so that resulted in a bit of a reversed in the mean in terms of credit and no real change there?

Charles E. Bradley

You know I think if anything we are still tiling we have a very risky score card and ironically as much as I think the numbers are up a little bit, it's a little bit more and now we are sort of trying to collect the little differently again sort of help the customers motor to both pick up the card on the one hand. On the other hand, I think that we are work to still tightening credit overall. We are not really expanding our buying and you are going to score card to find little niches there not performing we continue to tighten on regular basis. So it's probably little bit combination of both but as we lower that, we probably thing things will probably stay the same and probably over the next 6 to 9 months improve, collection wise.

Unidentified Analyst

Alright. And I can probably calculate this one over Q1and what not but how much more room is there on increasing the cost of funds, I mean say if you could hold the interest rates steady right now, how much further do you get you think you can reduce the cost of funds?

Charles E. Bradley

Well we could go on whole bunch I mean generally speaking the margin we look for used to be [Indiscernible] we used to look for is around 5% currently it's running at 3% that’s one metric. The other metric is our targeted APR and discount was 18% in the quarter and 1.5% we are running just short 1.5% and 20. So you figure you got 2 points in terms of our pricing and 2 points in terms of our cost to funds. You probably got four points of margin within half – three years ago. Having said that we probably don’t want to give it up but we could – at least the way we look at this, let’s say that our goal is to get from where we stand today to where we were which is $125 million, $2 billion portfolio about $125 million a month we were down to 18 in the quarter and 1% discount at 125 even if you just kept the cost of funds which we are not going to have that much to do with, you can make an awful lot of money.

Jeffrey P. Fritz

And Kyle specifically I think we probably have 12 to 24 months of improvements on blended funding cost as Jeff mentioned we are getting better execution on the new terms deals than the stuff that running off but remember we are also paying down the more expensive corporate debt. So between the two of those things, I think we still have some room to go. I don’t think we are going to see the improvements that we being seeing for the last few quarters but in terms of decrease in blended funding cost like I said, it's still 12 to 24 months out.

Unidentified Analyst

Alright. Thank you guys very much for answering my question.

Charles E. Bradley

Thank you.

Operator

Our next question comes from David Scharf of JMP Securities.

David M. Scharf – JMP Securities LLC, Research Division

Alright. Good morning. Brad as far as competition is concerned, I mean it doesn’t take much to read between the lines to see what was going on the fourth quarter but competition takes several forms. Would you generally characterize heightened competitive landscape out there is being more credit focused or pricing for you to dealer focused?

Charles E. Bradley

Normally we would, I mean in order to be fair, the fourth quarter is certain credit. We were very surprised how these people are buying in the fourth quarter. I think over the year, people have sort of gave up a lot of their APR to grow but [Indiscernible] fourth quarter probably have too much runway that way or in that way and so then they started working the credit. So I think people bought very aggressively in the fourth quarter.

David M. Scharf – JMP Securities LLC, Research Division

It sounds like by late January you started to see the typical rebound in volumes but what about the competitive trends you saw in the fourth quarter? Baited at all, now that role kind of miday way to February?

Charles E. Bradley

No, that was sort of interesting. In fact trend from the fourth quarter was still here, you wouldn’t really think we are getting such a jump in volume, a mere volume of 30% and that’s almost in line with the historical averages and it's still early. So one might think as I mentioned earlier is may be it has rationalized then everybody is just trying to pump up the fourth quarter so they could close their year. That would be the guess I put forward for what happened in the fourth quarter because it doesn’t appear to be that way now. I mean we are seeing certainly much more rational buying today than we did before. And then either way itself -- is sort of buy the same way all the time and in fact we are buying the same way in the fourth quarter, we didn’t see a lot of paper. Our numbers drop about 10% far than we might have expected the volume wise for the fourth quarter whereas we are not seeing that at all. We are almost seeing a little bit the opposite in the first quarter. So the thing is to say worth the norm in terms of how we are buying credit wise which is probably a very fair statement than people clearly are buying much more aggressively in the fourth quarter and less so now.

David M. Scharf – JMP Securities LLC, Research Division

Got it. Shifting to expenses, it looks like in the quarter your efficiency ratio managed close at 64 and you are trying to get a sense for how low that could go this year. I mean it seems like you are front end loaded a lot of the hiring on collections and then the originations side. I mean you are still hiring sales, people and there is training there. But given how much head count is already been layered on, can we see that efficiencies ratio get down closer to 6% this year?

Jeffrey P. Fritz

Yeah I think there is opportunities for that. We are staffed and origination department in the front end of the business to do significantly more volume that we are doing right now and so I think that the volume comes in as Brad said, that it looks like the pipeline is there. We don’t have to add [Indiscernible] to absorb that. The year goes on. We might do some hiring at the end of the year again to get ready for next year's lift probably obtainable, something close to it.

David M. Scharf – JMP Securities LLC, Research Division

When we think about that goal Brad $125 million I mean over what time frame is realistic. I mean obviously you are sought of 100 still.

Charles E. Bradley

Yes that’s an interesting question. (inaudible) move over to that goal as soon as I can, that’s a little bit controlled. The good news is on sort of one hand, the overall economic environment is a big factor and we think that’s very good. On the other hand, like I said, some people get super aggressive, it slows us down a little bit. And so we have to expand more of quick not quickly but we – so the problem is sort of in the backdrop, it takes time to expand geographically and so we are continuing to ramp that along as quickly as we can but it takes time to train those reps. On the other hand, if 10 people are sort of nipping at your heels like they were in the fourth quarter it definitely stalls your growth now we might pick a lot of that back up in the first and second quarter of this year. The easy answer is it's not going to happen this year, it could happen next year but much more likely the year after that we were going to sort of get. We’re sitting at around 70ish now and we can get to 90 or so this year and/or 85 or something and then maybe get over 100 the following year, so you know, three years and that’s pretty much just a ballpark, guess.

David M. Scharf – JMP Securities LLC, Research Division

Got it, got it. In order to get there, even to get to kind of 85, 90 this year, should we be thinking about your blended APR dipping below 20%, I mean, we’re going to need, kind of one or two more price cuts?

Charles E. Bradley

Painful as it is, you’re right. I think, we may, we may not have to, in my guess, if our hedging would be that we will drop the APR soon. How much, it’s hard to tell but let’s say for final I would like to keep it up for 19 that’s a little hard to tell.

But certainly, we’ve to get back some of the discount depending on where everyone else is doing, this year will be given back some of that APR. On the other hand, if we sort of execute a little better the market stays strong. All through we may not lose a thing overall. But yes, I would fully expect the APR to go below 20 over the next few quarters.

David M. Scharf – JMP Securities LLC, Research Division

I see. And lastly, one question for Robert, I can arguably look up some ABS trade [regs] for the answer, can you give me a feel for maybe it’s more at hindsight, but had you been able to achieve a AAA rating in your senior tranche, what that would have meant in terms of basis point improvement for the blended rate of your last deal?

Robert E. Riedl

Sure. I think it’s probably between 20 and 30 basis points.

David M. Scharf – JMP Securities LLC, Research Division

20 and 30, okay, thank you.

Charles E. Bradley

Thank you.

Operator

Our next question comes from Kirk Ludtke with CRT Capital Group.

Kirk Ludtke - CRT Capital Group LLC, Research Division

Good morning guys.

Charles E. Bradley

Good morning.

Kirk Ludtke - CRT Capital Group LLC, Research Division

Robert, you mentioned that you thought auction values would continue to decline, I’m just curious if you could quantify where you think recoveries will be this year?

Robert E. Riedl

Well now, I mean, I think seasonally this should be a good quarter, Q1 with the tax refund season. I think we finished up the year at 47 last year, maybe it’s 45 or 46 on a blended basis this year, I mean, the dynamics of the increased production over the course of last few years and more leased vehicles and those vehicles coming off-lease and going into the auction should put some downward pressure on prices. Flip side is the age of the fleet out there is still as old as it’s ever been and getting older 11 plus years, so there is still should be good demand for kind of recent in newer/used vehicles. So you know 100, 200 basis points maybe.

Kirk Ludtke - CRT Capital Group LLC, Research Division

Great. Thank you that’s helpful. And I think last quarter you mentioned that at some point you might want to raise some capital and lock in current rates. I am just curious if you have given that any more thought and what might prompt you to do that and what should use the capital for?

Charles E. Bradley

Yes certainly last, well I think the reason that sort of been mentioned in the past is we always thought we would need the capital just to keep the thing running and I think given how we have been able to execute over the last two years, I mean two years we needed cash. And so but between the way we were able to execute in wallstreet both the margins and the liquidity execution in terms of how we sold the securitizations. We have been able to generate significantly more cash than we would have expected over the last two years. And as a result where we might have penciled in I think back – couple of years ago, we might have penciled in a $40 million debt offering of some sort, this year we are not in a position where we might not be doing anything. So that’s the real positive is probably it's sort of hard to see in the big picture but it's certainly has had an enormous effect in how we run the company over the last two years.

Having said all that, to [extensively] clean up all the debt which we are going to do, and we are sitting there in a very good market and we find some very entertaining levels of debt to pick up, we might go do it. So at the moment we are in a nice position. We truly don’t need any capital. But to the extend we want to continue to do what we are doing, there is a chance I think the easy answer is try to go on, it's to say hey if we can find very attractive capital and debt, we would probably maybe take a whack at it this year. If we don’t, we probably wouldn’t. The easy answer is currently we don’t need anything which is –

Kirk Ludtke - CRT Capital Group LLC, Research Division

Got it. That’s the great position to be in. Thank you. And then lastly, is there any update on the FGC that you have, are you on ongoing communication with them? Do they – are they comfortable with the steps you have taken?

Charles E. Bradley

We are going to always I guess for the next few years or five years somewhat in communication with them but the easy answer is we reached an agreement with them, it is now currently wending its way through Washington which [couldn’t] hold bunch of things like forever, but no. we are just waiting for I think my understanding is we are waiting for to be signed off on, the deals have been negotiated and agreed to. So, we just need to wait and we have been waiting to be clear for well over a month and so we may even need to wait another month but that’s where we stand today.

Kirk Ludtke - CRT Capital Group LLC, Research Division

Great. Thank you very much.

Charles E. Bradley

Thank you.

Operator

(Operator Instructions) I’m not showing any further question at this time, I would like to turn the conference back over to Mr. Charles Bradley for closing remarks.

Charles E. Bradley

So, I think in sort of taking a step back from where we sit today, I think in ’07 we’re having a real good year and things fell apart, then in ’08, ’09 and ’10 is all about surviving and we did. ’11, ’12 and ’13 has been starting to grow again, we did some in ’11, more in ’12 and ’13 was a good year. So, we’ve now put three good years behind us after getting through the recession, we kind of think from a big picture that ’14 and ’15 could be very good years, at least from that big picture of the economy and so we now think at least we have two more years to continue what we have done in the last three, we think the company certainly has the experience, infrastructure to do just that and so we’d love to see, the wildcard or what’s the competition going to do, what the – is the market going to stay the way it is or helping the big picture market does, we are not overly worried about the competitions, competition gets too heated that will create more opportunities, we bought six different companies over the years, (inaudible). So one way or another we [Indiscernible] or we will pick up some people who grew too fast. So lots of opportunities come our way, 2014 we are hoping it will look a lot like 2013 in terms of sort of the overall environment.

Thank you all for attending the conference call and we look forward to speaking you in April.

Operator

Thank you. This does conclude today's teleconference. A replay will be available, beginning 2 hours from now until February 18 2014, at 11:59 p.m. by dialing (855) 859-2056 or (404) 537-3406, with the conference identification number 59435721. A broadcast of the conference call will also be available live and for 90 days after the live call via the company's website at www.consumerportfolio.com. Please disconnect your lines at this time, and have a wonderful day.

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