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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, 2002
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 independent auditors' report thereon, are filed herewith.
II. Exhibits:
A Consent of Independent Auditors 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 30, 2003 By: /s/ DORIS F. WARREN
Doris F. Warren
Member, Administrative Committee
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Financial Statements and Supplemental Schedule
December 31, 2002 and 2001
(With Independent Auditors' Report Thereon)
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
PAGE
Independent Auditors' Report 1
Statements of Net Assets Available for Benefits - December 31, 2002 and 2001 2
Statements of Changes in Net Assets Available for Benefits - Years ended
December 31, 2002 and 2001 3
Notes to Financial Statements 4
SCHEDULE
Schedule H, line 4i - Schedule of Assets (Held at End of Year) - December
31, 2002 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.
INDEPENDENT AUDITORS' REPORT
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, 2002 and 2001 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 auditing standards generally accepted
in the United States of America. 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 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, 2002 and 2001 and the changes in net assets available for benefits
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
Our audits were 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. This supplemental schedule is the
responsibility of the Plan's management. The supplemental schedule has been
subjected to the auditing procedures applied in the audits 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.
/s/ KPMG LLP
Los Angeles, California
June 24, 2003
1
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Statements of Net Assets Available for Benefits
December 31, 2002 and 2001
2002 2001
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Investments, at fair value:
Money market fund $ 32,681 $ 32,316
Guaranteed interest account 344,753 325,238
Mutual funds 1,903,487 2,149,606
Prudential Financial, Inc. common stock 14,473 --
Consumer Portfolio Services, Inc. common stock 804,440 557,726
Participant loans 171,337 135,166
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Total investments 3,271,171 3,200,052
Receivables:
Proceeds from demutualization -- 15,135
Employee Contributions 18,893 --
----------- -----------
Net assets available for benefits $3,290,064 $3,215,187
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See accompanying notes to financial statements.
2
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Statements of Changes in Net Assets Available for Benefits
Years ended December 31, 2002 and 2001
2002 2001
------------ ------------
Additions (reduction) to net assets attributed to:
Interest $ 26,670 $ 28,659
Dividends 28,202 29,232
Proceeds from demutualization (note 5) -- 15,135
Net depreciation in fair value of investments (234,628) (450,367)
------------ ------------
(179,756) (377,341)
Less investment expenses (6,790) (6,707)
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(186,546) (384,048)
Contributions:
Employees 711,577 812,807
Employees' individual rollover 10,252 4,028
------------ ------------
Total additions 535,283 432,787
Deductions from net assets attributed to:
Benefits paid to participants 460,406 483,382
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Net increase (decrease) 74,877 (50,595)
Net assets available for benefits:
Beginning of year 3,215,187 3,265,782
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End of year $ 3,290,064 $ 3,215,187
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See accompanying notes to financial statements.
3
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements
December 31, 2002 and 2001
(1) DESCRIPTION OF THE PLAN
(a) GENERAL
The Consumer Portfolio Services, Inc. (the Plan Sponsor or CPS)
401(k) Plan (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. The following description provides only general
information. Participants should refer to the Plan agreement for a
more complete description of the Plan's provisions.
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 administered under an
agreement which requires that Prudential Investments Retirement
Services (Prudential), custodian and recordkeeper, holds,
administers, 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
All employees of the Plan Sponsor are eligible to participate in
the Plan after they have completed 90 days of service. Each year
participants may contribute up to 15% of their compensation.
Contributions are subject to certain limitations as defined in the
Plan. 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 100% of the participant's pretax contributions not to
exceed $600 for the Plan year. Discretionary matching
contributions shall be made in the form of the Plan Sponsor's
common stock; however, no discretionary contributions were made in
2002 and 2001.
(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.
Forfeitures are used to reduce future employer contributions. For
the years ended December 31, 2002 and 2001 participant forfeitures
totaled $9,127 and $34,319, respectively. For the years ended
December 31, 2002 and 2001 the balance of forfeiture accounts
totaled $111,769 and $98,835, respectively.
(Continued)
4
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements
December 31, 2002 and 2001
(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
Employer contributions are invested in the Plan Sponsor's common
stock. Participant contributions may be invested at the
participant's direction into the following options:
CPS Stock Fund - The investment allows Plan participants to invest
in CPS stock.
Fidelity Advisor Growth Opportunities Fund - The fund normally
invests at least 65% of assets in equity securities of companies
that management of the fund believes have long-term growth
potential. It may also purchase fixed income securities. The fund
may invest without limit in foreign securities.
Franklin U.S. Government Securities Fund - The fund invests in
U.S. government obligations such as U.S. Treasury Securities and
obligations issued by instrumentalities of the U.S. government,
especially obligations of the Government National Mortgage
Association.
MFS Capital Opportunities Fund - The fund invests primarily in
common stocks. It may also hold fixed income securities, but it
may not invest more than 25% of assets in debt rated below BBB.
The fund may invest up to 50% of assets in foreign securities that
are not traded on a U.S. exchange, including emerging markets
issues; it may also invest in American Deposit Receipts.
MFS Total Return Fund - The fund generally maintains 40% to 75% of
assets in equity securities. It typically invests that balance in
debt securities, including up to 20% of assets in debt rated below
BBB. The fund may invest in foreign securities, including Brady
Bonds.
PIMCO Growth Fund - The fund invests primarily in common stocks
but it may also invest in convertible securities, U.S. government
debt, preferred stocks, and money market instruments. It may
invest without limit in foreign securities traded on domestic
exchanges, and up to 15% of assets in foreign securities traded
principally outside the U.S.
PIMCO Innovation Fund - The fund normally invests at least 65% of
its assets in common stock of companies which utilize new,
creative, or innovative technologies to gain a strategic
competitive advantage in their industry, as well as companies that
provide and service these technologies. The fund may also invest
in other securities including preferred stock and convertible
securities of smaller capitalization companies and in foreign
securities, except that it may invest without limit in ADRs.
Prudential Guaranteed Interest Account - The goal of the
Guaranteed Interest Account is to provide stable, competitive
interest rates based on current market conditions.
(Continued)
5
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements
December 31, 2002 and 2001
Prudential High Yield Fund - The fund normally invests at least
80% of assets in fixed income securities rated below A, but no
lower than B. The average weighted maturity generally ranges
between 7 and 12 years. The fund may invest up to 20% of assets in
U.S. dollar denominated foreign debt securities and up to 10% of
assets in foreign currency denominated debts securities.
Prudential Stock Index Fund - The fund seeks to replicate the
performance of the S&P 500 stock index.
Prudential Utility Fund - Seeks current income and capital
appreciation through investment in utility company stocks,
including electric, gas, telephone, and cable companies.
Prudential Global Growth Fund - Seeks long-term capital
appreciation with income as a secondary objective. The fund
invests primarily in domestic and foreign common stocks. The fund
typically maintains investments in at least four countries,
including the United States, but may invest up to 65% of assets in
any one country.
(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. 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 8.00% - 11.50%, with final payments due between January
2002 and October 2006, 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.
(i) PLAN TERMINATION
Although they have 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.
(2) SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF ACCOUNTING
The financial statements of the Plan have been prepared on the
accrual basis of accounting.
(Continued)
6
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements
December 31, 2002 and 2001
(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. The
guaranteed investment contract is valued at fair value adjusted
for changes in investment value plus credited interest.
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.
(c) ADMINISTRATIVE EXPENSES
All administrative costs of the Plan are paid by the Plan Sponsor.
(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
all 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 risks 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 26% and 17% of the Plan's investments
as of December 31, 2002 and 2001, respectively.
(Continued)
7
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements
December 31, 2002 and 2001
(3) INVESTMENTS
The fair value of investments that represent 5% or more of the Plan's net
assets consisted of:
2002 2001
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Investment:
CPS Stock Fund* $ 804,440 $ 557,726
Fidelity Advisor Growth Opportunities Fund 366,686 410,708
Franklin U.S. Government Securities Fund 192,104 176,609
MFS Capital Opportunities Fund 228,019 319,322
MFS Total Return Fund 176,282 162,450
PIMCO Growth Fund 236,312 287,983
Prudential Stock Index Fund 443,825 506,813
Prudential Guaranteed Interest Account 344,753 325,238
Other investments individually less than 5% 478,750 453,203
----------- -----------
$3,271,171 $3,200,052
=========== ===========
*Includes both participant and nonparticipant directed investments.
During 2002 and 2001, the Plan's investments (including gains and losses
on investments bought and sold, as well as held during the year)
appreciated (depreciated) in value by investment type, as follows:
2002 2001
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Investment:
Mutual funds $(514,702) $(402,042)
Common Stocks 280,074 (48,325)
---------- ----------
$(234,628) $(450,367)
========== ==========
(Continued)
8
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements
December 31, 2002 and 2001
(4) NONPARTICIPANT-DIRECTED INVESTMENT
Information about the net assets and the significant components of the
changes in net assets relating to the nonparticipant-directed investments
is as follows:
2002 2001
---------- ----------
Investment:
CPS common stock $ 804,440 $ 557,726
Prudential Financial, Inc. common stock 14,473 --
---------- ----------
$ 818,913 $ 557,726
========== ==========
YEAR ENDED
DECEMBER 31,
2002
----------
Changes in net assets:
Contributions $ 106,286
Net appreciation (depreciation) 280,074
Benefits paid to participants (39,792)
Transfers to participant-directed investments (85,381)
----------
$ 261,187
==========
(5) 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). On 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 pending its allocation to participant
accounts.
(6) 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). 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.
(Continued)
9
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements
December 31, 2002 and 2001
(7) RELATED PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by Prudential
Investments Fund Management, an affiliate of Prudential Investments
Retirement Services. Therefore, these transactions qualify as
party-in-interest transactions. Fees for the investment management
services are paid out of Plan assets. In addition, the Plan held 384,899
and 407,099 shares of common stock of Consumer Portfolio Services, Inc.
at December 31, 2002 and 2001, respectively.
(8) SUBSEQUENT EVENT
The Plan changed its custodian and recordkeeper from Prudential to
MassMutual Retirement Services (Mass Mutual) during 2003. In addition,
the MFN Financial 401(k) plan (the MFN Plan), a plan sponsored by MFN
Financial Corporation, a subsidiary of CPS, was merged into the Plan
during 2003.
(Continued)
10
SCHEDULE
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2002
DESCRIPTION OF INVESTMENT,
IDENTITY OF ISSUER, INCLUDING MATURITY DATE,
BORROWER, LESSOR, OR RATE OF INTEREST, COLLATERAL,
SIMILAR PARTY PAR, OR MATURITY VALUE COST CURRENT VALUE
---------------------------- ---------------------------------------- -------------- -------------
* Consumer Portfolio
Services, Inc. + common stock - 384,899 shares $ 792,347 $ 804,440
* Prudential Financial, Inc. ++ common stock - 456 shares -- 14,473
* Prudential Investments Prudential Guaranteed Interest
Account, 344,753 units 344,753
Franklin Advisors Franklin U.S. Government Securities
Fund, 27,444 units 192,104
Fidelity Management Fidelity Advisors Growth
and Research Opportunities Fund, 16,525 units 366,686
MFS Investment MFS Capital Opportunities Fund,
Management 24,413 units 228,019
MFS Investment Management MFS Total Return Fund, 13,284 units 176,282
PIMCO Advisors PIMCO Growth Fund, 15,435 units 236,312
PIMCO Advisors PIMCO Innovation Fund, 3,348 units 36,061
* Prudential Investments Prudential High Yield Fund,
8,480 units 42,398
* Prudential Investments Prudential Stock Index Fund,
22,644 units 443,825
* Prudential Investments Prudential Utility Fund, 8,683 units 61,217
* Prudential Investments Prudential Global Growth Fund,
11,986 units 120,583
* Prudential Investments Prudential Government Securities
Money Market, 32,681 units 32,681
* Participant loans Participant loans; interest rate
between 5.75% and 11.50%;
maturing between February 2003
and October 2012 171,337
-------------
$ 3,271,171
=============
* Denotes a party in interest.
+ Includes both participant and nonparticipant directed investments.
++ Non-participant directed investments pending allocation to participant
accounts
See accompanying independent auditors' report.
11