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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, 2005
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:
Consent of Independent Registered Public Accounting Firm is filed
herewith as Exhibit 23.1.
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: June 28, 2006 By: /s/ Jeffrey P. Fritz
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Jeffrey P. Fritz
Member, Administrative Committee
CONSUMER PORTFOLIO SERVICES, INC. 401(K) PLAN
Financial Statements and Supplemental Schedule
December 31, 2005 and 2004
(With Report of Independent Registered Public Accounting Firm Thereon)
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
PAGE
Report of Independent Registered Public Accounting Firm 2
Statements of Net Assets Available for Benefits -
December 31, 2005 and 2004 3
Statements of Changes in Net Assets Available for Benefits -
Years ended December 31, 2005 and 2004 4
Notes to Financial Statements 5
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) -
December 31, 2005 10
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 statements of net assets available for benefits
of the Consumer Portfolio Services, Inc. 401(k) Plan (the "Plan") as of December
31, 2005 and 2004, and the related statements of changes in net assets available
for benefits for the years 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 audits.
We conducted our audits 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. The Plan is not required to have,
nor were we engaged to perform, an audit of its internal control over financial
reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Plan's internal control over financial reporting.
Accordingly, we express no such opinion. 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 audits provide 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, 2005 and 2004, and the changes in net assets available for benefits
for the years 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 schedule, schedule H,
line 4i - schedule of assets (held at end of year) is 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. The supplemental schedule is the
responsibility of the Plan's management. The supplemental schedule has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated, in all material respects, in
relation to the basic financial statements taken as a whole.
HASKELL & WHITE LLP
June 28, 2006
Irvine, California
2
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Statements of Net Assets Available for Benefits
December 31, 2005 and 2004
2005 2004
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Investments, at fair value:
Interest bearing cash $ 69,024 $ 48,639
Guaranteed interest account 2,267,546 2,097,832
Mutual funds 8,154,970 7,504,366
Consumer Portfolio Services, Inc. common stock 2,138,791 1,739,535
Participant loans 472,126 452,880
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Total investments 13,102,457 11,843,252
Receivables:
Employee contributions -- 44,771
Employer contributions -- 6,670
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-- 51,441
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----------- -----------
Net assets available for benefits $13,102,457 $11,894,693
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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, 2005 and 2004
2005 2004
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Additions (reduction) to net assets attributed to:
Interest $ 245,367 $ 79,050
Net appreciation in fair value of investments 780,860 1,035,922
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1,026,227 1,114,972
Investment expenses (92,127) (77,833)
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934,100 1,037,139
Contributions:
Employees 1,153,048 1,037,586
Employer 427,378 399,961
Employees' individual rollover 46,168 153,534
Transfer in from a merged plan (Note 1) -- 2,061,590
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Total additions 2,560,694 4,689,810
Deductions from net assets attributed to:
Benefits paid to participants 1,352,930 884,808
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Net increase 1,207,764 3,805,002
Net assets available for benefits:
Beginning of year 11,894,693 8,089,691
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End of year $ 13,102,457 $ 11,894,693
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See accompanying notes to financial statements
4
CONSUMER PORTFOLIO SERVICES, INC. 401(K) PLAN
Notes to Financial Statements
December 31, 2005 and 2004
(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.
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 $14,000 and $13,000 for the years ended December 31, 2005
and 2004, respectively, under the Internal Revenue Code of 1986
(exclusive of additional contributions that are permitted if certain
age criteria are satisfied). 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 $427,378 and
$399,961 for the years ended December 31, 2005 and 2004, respectively.
(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.
5
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements (Continued)
December 31, 2005 and 2004
(1) DESCRIPTION OF THE PLAN (CONTINUED)
(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 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
between 5.00% and 11.50%, with final payments due between February
2005 and June 2018, 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, 2005 and 2004
(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, 2005 and 2004,
forfeited accounts totaled $332,718 and $245,420, 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 MERGER
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
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, 2005 and 2004
(2) SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(d) USE OF ESTIMATES
The Plan Administrator has made 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 17% and 15% of the Plan's investments as of
December 31, 2005 and 2004, respectively.
(g) RECLASSIFICATIONS
Certain balances in the 2004 financial statements have been
reclassified to conform to the current year presentation. This
reclassification had no effect on net assets or the change in net
assets.
8
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements (Continued)
December 31, 2005 and 2004
(3) INVESTMENTS
The following presents the fair value of investments that represent 5% or
more of the Plan's net assets:
2005 2004
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Investment:
MM Guaranteed Interest Account $ 2,267,546 $ 2,097,832
Main Street (Oppenheimer) 985,765 938,425
MM Aggressive Growth (Sands Cap) 891,038 801,210
MM Blue Chip Growth (Fidelity) -- 467,076
MM Fundamental Val (Wellington) -- 633,812
MM Indexed Equity (Northern Trust) 1,319,466 1,310,955
MM Moderate Journey 655,876 --
CPS Common Stock 2,138,791 1,739,535
Other investments individually less than 5% 4,843,975 3,854,407
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$13,102,457 $11,843,252
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During 2005 and 2004, 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:
2005 2004
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Investment appreciation:
Mutual funds $ 477,843 $ 740,537
Common stocks 303,017 295,385
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$ 780,860 $ 1,035,922
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(4) TAX STATUS
The Internal Revenue Service has determined and informed the Plan Sponsor
by a letter dated April 23, 2002 that the Plan and related trust, as
adopted based on Mass Mutuals' prototype plan, 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, 2005
Plan #001 - EIN# 32-0021607
(b)
Identity of issuer, (c)
borrower, lessor or Description of investment including maturity date, rate of (d) (e)
similar party interest, collateral, par or maturity value Cost Current value
------------- ------------------------------------------- ---- -------------
MassMutual Interest Bearing Cash 69,024 69,024
MassMutual Guaranteed Interest Account 2,267,546 2,267,546
MassMutual Holding Account - SIA-AG 0 0
MassMutual SIA-A1 384,212 439,525
MassMutual SIA-AD 636,614 891,038
MassMutual SIA-AK 438,632 582,801
MassMutual SIA-AL 324,268 381,468
MassMutual SIA-AN 93,558 110,311
MassMutual SIA-AX 1,046,522 1,319,466
MassMutual SIA-DA 309,298 348,434
MassMutual SIA-DC 176,857 203,942
MassMutual SIA-DE 38,051 42,684
MassMutual SIA-DM 561,897 655,876
MassMutual SIA-LB 362,985 426,505
MassMutual SIA-NM 74,919 83,360
MassMutual SIA-NS 3,067 3,067
MassMutual SIA-05 794,321 985,765
MassMutual SIA-09 114,977 128,118
MassMutual SIA-OD 255,080 358,805
MassMutual SIA-WR 438,083 569,910
MassMutual SIA-WT 128,234 148,661
MassMutual SIA-WY 35,498 36,211
MassMutual SIA-WZ 258,567 275,283
MassMutual SIA-Y 158,076 163,740
MassMutual Outside Fund - Consumer Portfolio Services, Inc. Common Stock 1,295,127 2,138,791
Participant Loans 5.00% - 11.50% 0 472,126