Funding and Financing - Current short-term funding capacity is $200 million, comprising two credit facilities, each with a maximum credit limit of $100 million[125]. - The company depends on its ability to securitize automobile contracts for permanent financing, which is subject to market conditions and other factors beyond its control[127]. - The company completed 36 securitizations from 2010 to 2019, but faced challenges in 2020 due to the pandemic, leading to postponed securitizations[128]. - The company’s results of operations are significantly affected by cash flows from residual interests in securitization programs and warehouse credit facilities[130]. - If interest rates rise, the company expects increased interest expenses, which could materially affect future results of operations[135]. - The company is subject to risk retention rules requiring retention of at least 5% of credit risk for asset-backed securities, potentially increasing capital requirements[156]. Competition and Market Risks - The automobile financing business is highly competitive, with competitors having greater financial resources and access to capital markets[137]. - The company specializes in sub-prime automobile contracts, which carry higher risks of nonperformance and defaults[139]. - Economic downturns, particularly in states like California, Ohio, Texas, and Florida, could lead to increased delinquencies and adversely affect operations[183]. - The COVID-19 pandemic has caused significant economic disruptions, potentially impacting obligors' ability to make timely payments[184]. - Natural disasters in key states like California and Texas could lead to job losses and damage to vehicles securing automobile contracts, affecting revenue[188]. Financial Condition and Indebtedness - As of December 31, 2021, the company had approximately $1,945.7 million in outstanding debt, primarily consisting of $1,760.0 million in securitization trust debt[167]. - The company's substantial indebtedness may increase vulnerability to adverse economic conditions and limit flexibility in business planning[168]. - The company maintains an allowance for credit losses on automobile contracts, which could adversely affect results if inadequate[141]. - The company's profitability is largely determined by the "spread" between the effective interest rate on automobile contracts and the interest rates payable under warehouse credit facilities and asset-backed securities[190]. - An increase in prevailing interest rates could reduce excess spread cash flows from automobile contracts, adversely affecting earnings and cash flows[190]. - The company acknowledges that a recession or depression in local, regional, or national economies would likely increase delinquencies and losses, negatively impacting financial condition[189]. Legal and Compliance Risks - Compliance with laws and regulations is critical, as failure to comply could result in penalties and adversely affect financial condition[151]. - The company faces litigation risks that could materially affect financial position and results of operations, with potential claims for substantial damages[158]. - The company has recorded loss contingencies only for matters where losses are probable and can be reasonably estimated, but actual losses may exceed reserves[159]. Shareholder Information - As of December 31, 2021, directors and executive officers collectively owned 6.4 million shares of common stock, representing approximately 30% ownership[191]. - The company has never declared or paid any cash dividends on its common stock and intends to retain future earnings without expecting to pay dividends in the foreseeable future[192]. - Limited trading volume of the company's common stock contributes to more volatile price fluctuations, with no assurance against stock price decline[191]. Forward-Looking Statements - Forward-looking statements in the report involve risks and uncertainties, including unexpected events, changes in economic conditions, and competition[194]. - The company does not guarantee performance based on forward-looking statements, as actual results may differ due to various uncontrollable factors[194]. - The company undertakes no obligation to publicly update any forward-looking information, advising consultation of periodic reports filed with the SEC for additional disclosures[195].
CPS(CPSS) - 2021 Q4 - Annual Report