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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 11-K
(Mark One)
[x] Annual Report pursuant to Section 15(d) of the Securities Exchange of
1934
For the fiscal year ended December 31, 2004
OR
[ ] Transition Report pursuant to Section 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the transition period from ______ to_______
Commission File Number 1-11416
A. Full title of the plan and the address of the plan, if
different from that of the issuer named below:
Consumer Portfolio Services, Inc. 401(k) Plan
B. Name of issuer of the securities held pursuant to the plan and
the address of its principal executive office:
Consumer Portfolio Services, Inc.
16355 Laguna Canyon Road
Irvine, CA 92618
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REQUIRED INFORMATION
I. Financial Statements.
Financial statements and schedule prepared in accordance with the
financial reporting requirements of the Employee Retirement Income Security Act
of 1974, together with the report of independent registered public accounting
firm thereon, are filed herewith.
II. Exhibits:
Consents of Independent Registered Public Accounting Firms are filed
herewith as Exhibits 23.1 and 23.2.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the Plan) have duly caused this annual
report to be signed on its behalf by the undersigned, hereunto duly authorized.
Consumer Portfolio Services, Inc. 401(k)Plan
Date: September 30, 2005 By: /s/ Jeffrey P. Fritz
--------------------------------
Jeffrey P. Fritz
Member, Administrative Committee
CONSUMER PORTFOLIO SERVICES, INC. 401(K) PLAN
Financial Statements and Supplemental Schedules
December 31, 2004 and 2003
(With Reports of Independent Registered Public Accounting Firms Thereon)
CONSUMER PORTFOLIO SERVICES, INC. 401(K) PLAN
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
PAGE
Reports of Independent Registered Public Accounting Firms 1
Statements of Net Assets Available for Benefits - December 31, 2004 and 2003 3
Statements of Changes in Net Assets Available for Benefits - Years ended
December 31, 2004 and 2003 4
Notes to Financial Statements 5
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) -
December 31, 2004 10
Schedule H, Line 4a - Schedule of Delinquent Participant Contributions 11
All schedules omitted are not applicable or are not required based on disclosure
requirements of the Employee Retirement Income Security Act of 1974 and
regulations issued by the Department of Labor.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Administrator
Consumer Portfolio Services, Inc. 401(k) Plan:
We have audited the accompanying statement of net assets available for benefits
of the Consumer Portfolio Services, Inc. 401(k) Plan (the Plan) as of December
31, 2004 and the related statement of changes in net assets available for
benefits for the year then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2004 and the changes in net assets available for benefits for the
year then ended in conformity with U.S. generally accepted accounting
principles.
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules, schedule H,
line 4i - schedule of assets (held at end of year) and Schedule H, line 4a -
schedule of delinquent participant contributions are presented for the purpose
of additional analysis and is not a required part of the basic financial
statements but is supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. These supplemental schedules are the
responsibility of the Plan's management. The supplemental schedules have been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, are fairly stated, in all material respects, in
relation to the basic financial statements taken as a whole.
/s/ Haskell & White LLP
September 12, 2005
Irvine, California
1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Administrator
Consumer Portfolio Services, Inc. 401(k) Plan:
We have audited the accompanying statement of net assets available for benefits
of the Consumer Portfolio Services, Inc. 401(k) Plan (the Plan) as of December
31, 2003 and the related statement of changes in net assets available for
benefits for the year then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits as of December 31,
2003 and the changes in net assets available for benefits for the year then
ended in conformity with U. S. generally accepted accounting principles.
/s/ KPMG LLP
Costa Mesa, California
June 28, 2004
2
CONSUMER PORTFOLIO SERVICES, INC. 401(K) PLAN
Statements of Net Assets Available for Benefits
December 31, 2004 and 2003
2004 2003
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Investments, at fair value:
Guaranteed interest account $ 2,097,832 1,517,379
Mutual funds 7,504,366 4,961,240
Consumer Portfolio Services, Inc. common stock 1,788,174 1,337,314
Participant loans 452,880 261,039
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Total investments 11,843,252 8,076,972
Receivables:
Employee contributions 44,771 16,391
Employer contributions 6,670 --
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51,441 16,391
Payables:
Excess contributions refundable -- (3,672)
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Net assets available for benefits $11,894,693 8,089,691
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See accompanying notes to financial statements.
3
CONSUMER PORTFOLIO SERVICES, INC. 401(K) PLAN
Statements of Changes in Net Assets Available for Benefits
Years ended December 31, 2004 and 2003
2004 2003
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Additions (reduction) to net assets attributed to:
Interest $ 79,050 11,634
Dividends -- 3,249
Net appreciation in fair value of investments 1,035,922 1,933,486
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1,114,972 1,948,369
Investment expenses (77,833) (57,378)
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1,037,139 1,890,991
Contributions:
Employees 1,037,586 803,110
Employer 399,961 297,665
Employees' individual rollover 153,534 19,821
Transfer in from a merged plan (Note 1) 2,061,590 3,293,882
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Total additions 4,689,810 6,305,469
Deductions from net assets attributed to:
Benefits paid to participants 884,808 1,505,842
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Net increase 3,805,002 4,799,627
Net assets available for benefits:
Beginning of year 8,089,691 3,290,064
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End of year $ 11,894,693 8,089,691
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See accompanying notes to financial statements
4
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements
December 31, 2004 and 2003
(1) DESCRIPTION OF THE PLAN
The following description of the Consumer Portfolio Services, Inc. (the
Plan Sponsor or CPS) 401(k) Plan (The Plan) provides only general
information. Participants should refer to the Plan agreement for a more
complete description of the Plan's provisions.
(a) GENERAL
The Plan was established as a profit sharing plan with a cash or
deferred arrangement on January 1, 1994. The Plan was restated as
of January 1, 1996 to permit investment in the Plan Sponsor's
common stock without regard to Section 407(a) of ERISA. Effective
January 1, 2003 the Plan Sponsor adopted the Mass Mutual Life
Insurance Company Flexinvest(R) Prototype Non-Standardized 401(k)
Profit Sharing Plan.
The Plan is a defined contribution plan which provides retirement
benefits for eligible employees of the Plan Sponsor. It is subject
to the provisions of the Employee Retirement Income Security Act
of 1974 (ERISA).
(b) ADMINISTRATION OF THE PLAN
The Plan is administered by the Human Resources Department (the
Plan Administrator) of the Plan Sponsor. The Plan Administrator
consults with the board of directors and other key management of
the Plan Sponsor when managing the operations and the
administration of the Plan.
During 2002 and through March 4, 2003, the Plan was managed by The
Prudential Insurance Company of America. As of March 4, 2003, the
Plan is operated under an agreement which requires that Mass
Mutual Retirement Savings (Mass Mutual), custodian and
recordkeeper, holds and distributes the funds of the Plan in
accordance with the text of the Plan and the instructions of the
Plan Administrator or its designees.
(c) CONTRIBUTIONS
Employees are eligible to participate in the Plan after completing
90 days of service. In accordance with the Plan, participants may
contribute up to 50% of their annual compensation. Contributions
are subject to certain limitations as defined in the Plan as well
as a maximum of $13,000 and $12,000 for the years ended December
31, 2004 and 2003 , respectively, under the Internal Revenue Code
of 1986. Participants may roll over into the Plan amounts
representing distributions from other qualified plans.
The Plan Sponsor may make a discretionary matching contribution
equal to a discretionary percentage of the participant's pretax
contributions. Discretionary matching contributions were $399,961
and $297,665 for the years ended December 31, 2004 and 2003,
respectively.
5
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements (Continued)
December 31, 2004 and 2003
(1) DESCRIPTION OF THE PLAN (CONTINUED)
(d) PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's
contributions, allocations of the Plan Sponsor's matching
contributions and investment earnings and charged with an
allocation of expenses and investment losses. Allocations are
based on participant earnings or account balances, as defined.
(E) VESTING
Participants are immediately vested in their contributions plus
actual earnings thereon. Vesting in the Plan Sponsor's matching
contributions plus actual earnings thereon is based on years of
continuous service. A participant vests at the rate of 20% after
two years of credited service and 20% each year thereafter until
100% is reached after six years of credited service. Participants
are also fully vested at death, retirement, and upon termination
for disability.
(F) INVESTMENT OPTIONS
The Plan offers various investment options which are managed by
several outside investment managers. Upon enrollment in the Plan,
participants may direct their contributions in any of the
investment options offered at the time. Participants may change
their investment options daily. Participants should refer to the
Plan fund description pamphlet for a complete description of the
investment options and for the detailed composition of each
investment fund.
(G) PARTICIPANTS LOANS
Participants may borrow from their fund accounts. Loan
transactions are treated as a transfer to (from) the investment
funds. The loans are secured by the balance in the participant's
account and bear interest at a rate commensurate with local
prevailing rates as determined by the Plan Administrator. Loans
are limited to the lesser of $50,000, reduced by the highest
outstanding loan balance during the preceding 12 months, or 50% of
the participant's vested account balance. A loan shall be repaid
within five years, unless it is used for the purchase of a primary
residence. Principal and interest are paid ratably through payroll
deductions.
Participant loans are included in the statements of net assets
available for plan benefits at their outstanding balances, which
approximate fair value of the notes. The notes are payable through
payroll deductions in installments of principal plus interest at
rates of 5.00% - 11.50%, with final payments due between January
2004 and October 2012, and are secured by the participants' vested
account balances.
(H) PAYMENTS OF BENEFITS
Upon termination of service, a participant may elect to receive
either a single lump sum payment in cash equal to the value of the
vested interest in his or her account, or a series of
substantially equal annual or more frequent installments over a
period not to exceed the participant's life expectancy. Benefits
are recorded when paid.
6
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements (Continued)
December 31, 2004 and 2003
(1) DESCRIPTION OF THE PLAN (CONTINUED)
(I) FORFEITED ACCOUNTS
Through December 31, 2002 forfeitures were applied to reduce any
employer contribution. Effective January 1, 2003, forfeitures
attributable to matching contributions will be applied first to
reduce expenses related to the administration of the Plan and then
to reduce any employer contributions. As of December 31, 2004 and
2003, forfeited accounts totaled $245,420 and $163,784,
respectively.
(J) PLAN TERMINATION
Although it has not expressed any intent to do so, the Plan
Sponsor has the right under the Plan to discontinue contributions
at any time and to terminate the Plan subject to the provisions of
ERISA. In the event of Plan termination, participants will become
100% vested in their accounts.
(K) PLAN MERGERS
The board of directors approved a merger of the MFN Financial
Corporation Retirement Savings Plan into the Plan. The sponsor of
the MFN Financial Corporation Retirement Savings Plan is MFN
Financial Corporation, a subsidiary of Consumer Portfolio
Services, Inc. Assets of $3,293,882 were transferred into the Plan
on February 12, 2003. Effective January 1, 2004 the board of
directors approved a merger of The Finance Company 401(k) Plan
into the Plan. The sponsor of The Finance Company 401(k) Plan was
The Finance Company, a subsidiary of Consumer Portfolio Services,
Inc. Assets of $2,061,590 were transferred into the Plan on March
2, 2004.
(2) SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF ACCOUNTING
The financial statements of the Plan have been prepared on the
accrual basis of accounting.
(B) INVESTMENTS
Publicly traded securities are carried at fair value based on the
published market quotations. Shares of mutual funds are valued at
the net asset value of shares held by the Plan at year-end.
Participant loans are valued at their outstanding balances, which
approximates fair value. Purchases and sales of investments are
recorded on a trade-date basis. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual
basis.
Realized gains and losses on investments are based on the market
value of the asset at the beginning of the year or at the time of
purchase for assets purchased during the year and the related fair
value on the day the investments are sold during the year.
(C) ADMINISTRATIVE EXPENSES
The Plan and the plan sponsor share in plan expenses. Certain
direct investment expenses, such as loan, withdrawal or
distribution processing fees are deducted from participants'
accounts.
7
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements (Continued)
December 31, 2004 and 2003
\
(2) SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(d) USE OF ESTIMATES
The Plan Administrator has made a number of estimates and
assumptions relating to the reporting of assets and liabilities to
prepare these financial statements in conformity with accounting
principles generally accepted in the United States of America.
Accordingly, actual results may differ from those estimates.
(e) RISKS AND UNCERTAINTIES
The Plan provides for various investments options in money market
funds, mutual funds, guaranteed interest accounts and the common
stock of Consumer Portfolio Services, Inc. Investment securities
are exposed to various risks such as interest rate, market, and
credit risks. Due to the level of uncertainty related to changes
in value of investment securities, it is at least reasonably
possible that changes in the various risk factors could materially
affect participants' account balances and the amounts reported in
the financial statements.
(f) CONCENTRATION
Investments in the common stock of Consumer Portfolio Services,
Inc. comprise approximately 15% and 17% of the Plan's investments
as of December 31, 2004 and 2003, respectively.
(3) INVESTMENTS
The following presents the fair value of investments that represent 5% or
more of the Plan's net assets:
2004 2003
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Investment:
MM Guaranteed Interest Account $ 2,097,832 1,517,379
Main Street (Oppenheimer) 938,425 642,986
MM Aggressive Growth (Sands Cap) 801,210 627,463
MM Blue Chip Growth (Fidelity) * 467,076 453,227
MM Fundamental Val (Wellington) 633,812 445,127
MM Indexed Equity 1,310,955 807,979
CPS Common Stock 1,788,174 1,337,314
Other investments individually less than 5% 3,805,768 2,245,497
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$11,843,252 8,076,972
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* Less than 5.0% at December 31, 2004
8
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements (Continued)
December 31, 2004 and 2003
(2) SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
During 2004 and 2003, the Plan's investments (including gains and losses
on investments bought and sold, as well as held during the year)
appreciated in value by investment type, as follows:
2004 2003
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Investment:
Mutual funds $ 740,537 1,222,306
Common stocks 295,385 711,180
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$1,035,922 1,933,486
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(4) DEMUTUALIZATION OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
On December 18, 2001 The Prudential Insurance Company of America
(Prudential Insurance) converted from a mutual life insurance company
owned by its policyholders to a stock life insurance company and became
an indirect, wholly owned subsidiary of Prudential Financial, Inc.
(Prudential Financial). In January 2002, as part of the conversion, the
Plan received 456 shares of Prudential Financial's common stock. The
shares received by the Plan represent the compensation to which the Plan
was entitled under Prudential Insurance's demutualization plan, which was
approved by the state of New Jersey on October 15, 2001. The fair value
of the common stock was recorded as a receivable as of December 31, 2001
and, upon receipt of the common stock in 2002, as an investment. The
common stock is nonparticipant-directed allocated to participant accounts
in 2003.
(5) TAX STATUS
The Internal Revenue Service has determined and informed the Plan Sponsor
by a letter dated February 7, 1996 that the Plan and related trust are
designed in accordance with applicable sections of the Internal Revenue
Code (IRC) and is, therefore, exempt from Federal income taxes. The Plan
has been amended since receiving the determination letter. However, the
Plan Administrator believes that the Plan is designed and is currently
being operated in compliance with the applicable requirements of the IRC.
Accordingly, no provision for income taxes is included in the
accompanying financial statements.
9
CONSUMER PORTFOLIO SERVICES, INC. 401(K) PLAN
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2004
Identity of issuer,
borrower, lessor or Description of investment including maturity date, rate of
similar party interest, collateral, par or maturity value Cost Current value
------------- ------------------------------------------- ---- -------------
MassMutual Guaranteed Interest Account 2,097,832 2,097,832
MassMutual Holding Account - SIA-AG 0 2
MassMutual Consumer Portfolio Services, Inc. common stock 941,957 1,788,174
MassMutual Fidelity Dividend Growth Fund 19,244 19,659
MassMutual Fidelity Fund 51,172 54,720
MassMutual Sel Blue Chip Growth (Fidelity) 408,841 467,078
MassMutual Sel Aggressive Growth (Sands) 573,977 801,210
MassMutual Sel Fundamental Value (Wellington) 483,499 633,812
MassMutual Sel Growth Equity (GMO) 296,139 350,513
MassMutual Sel OTC 100 (Northern Trust) 98,663 121,016
MassMutual Sel Indexed Equity (Northern Trust) 1,055,641 1,310,955
MassMutual Aggressive Journey 175,714 197,737
MassMutual Conservative Journey 175,253 205,574
MassMutual Ultra Aggressive Journey 30,699 35,714
MassMutual Moderate Journey 417,565 495,804
MassMutual Sel Stratified Balance (Salomon) 327,814 380,163
MassMutual Prime Small Company Opportunity (Babson) 103,538 120,658
MassMutual Premier Main Street (OFI) 763,919 938,425
MassMutual High Yield (OFI) 126,142 146,006
MassMutual Premier Global (OFI) 172,235 251,045
MassMutual International New Discovery (MFS) 256,690 347,088
MassMutual Mid Cap Core Equity (AIM) 141,443 157,681
MassMutual Total Return (PIMCO) 309,297 328,741
MassMutual Prime Inflation Protection Bd (Babson) 135,905 140,765
Participant Loans 5.00% - 11.50% 452,880 452,880
11,843,252
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10
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Schedule H, Line 4a - Schedule of Delinquent Participant Contributions
December 31,2004
Relationship Description of
to plan, transaction,
Identity of employer or other including rate Amount on
Party Involved party-in interest of interest line 4(a) Lost Interest
-------------- ----------------- ----------- --------- -------------
Consumer Portfolio Plan Sponsor Participant $44,423 $67
Services, Inc. Contribution
11