cpss10k-a.htm
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K/A Amendment No. 1
[X]
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the fiscal year ended December 31, 2008
Commission
file number: 001-14116
CONSUMER
PORTFOLIO SERVICES, INC.
(Exact
name of registrant as specified in its charter)
|
California
|
33-0459135
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
|
|
|
|
19500
Jamboree Road, Irvine, CA
|
92612
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including area code: (949) 753-6800
Securities
registered pursuant to Section 12(b) of the Act:
Title of Each
Class Name of Each Exchange on
Which Registered
Common
Stock, no par
value The
Nasdaq Stock Market LLC (Global
Market)
Securities registered pursuant to
Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.Yes [ ]No [ X ]
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act.Yes [ ]No [ X
]
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90 days. Yes [
X ] No [ ]
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes [ X
] No [ ]
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definition of "large accelerated
filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer
[ ] Accelerated
filer
[ ]
Non-accelerated
filer [ ]
Smaller reporting company [ X ]
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).Yes [ ]No [ X
]
The
aggregate market value of the 16,412,115 shares of the registrant’s common stock
held by non-affiliates as of the date of filling of this report, based upon the
closing price of the registrant’s common stock of $1.47 per share reported by
Nasdaq as of June 30, 2008, was approximately $24,125,809. For purposes of this
computation, a registrant sponsored pension plan and all directors and executive
officers are deemed to be affiliates. Such determination is not an admission
that such plan, directors and executive officers are, in fact, affiliates of the
registrant. The number of shares of the registrant’s Common Stock outstanding on
April 23, 2009, was 18,812,709.
DOCUMENTS INCORPORATED BY
REFERENCE None
TABLE
OF CONTENTS
PART
III
PART
III
Information
regarding the executive officers of the registrant (the "Company" or "CPS")
appears in Part I of this report as filed on March 31, 2009, and is incorporated
herein by reference.
The names
of the Company’s directors, their principal occupations, and certain other
information regarding them are set forth below.
|
Name
|
Age
|
Position(s)
with the Company
|
|
Charles
E. Bradley, Jr.
|
49
|
President,
Chief Executive Officer, and Chairman of the Board of
Directors
|
|
Chris
Adams
|
60
|
Director
|
|
E.
Bruce Fredrikson
|
71
|
Director
|
|
Brian
J. Rayhill
|
46
|
Director
|
|
William
B. Roberts
|
71
|
Director
|
|
John
C. Warner
|
61
|
Director
|
|
Gregory
Washer
|
47
|
Director
|
|
Daniel
S. Wood
|
50
|
Director
|
|
|
|
|
Charles E. Bradley, Jr. has
been the President and a director of the Company since its formation in March
1991, and was elected Chairman of the Board of Directors in July
2001. Mr. Bradley has been the Company's Chief Executive Officer
since January 1992. From April 1989 to November 1990, he served as
Chief Operating Officer of Barnard and Company, a private investment
firm. From September 1987 to March 1989, Mr. Bradley, Jr. was an
associate of The Harding Group, a private investment banking
firm.
Chris A. Adams has been a
director of the Company since August 2007. Since 1982 he has been the
owner and chief executive of Latrobe Pattern Company and K Castings Inc., which
are firms engaged in the business of fabricating metal parts.
E. Bruce Fredrikson has been a
director of the Company since March 2003. He is a Professor of
Finance, Emeritus, at Syracuse University's Martin J. Whitman School of
Management, where he taught from 1966 to 2003. Mr. Fredrikson
has published numerous papers on accounting and finance
topics.
Brian J. Rayhill has been a
director of the Company since August 2007. Mr. Rayhill has been a
practicing attorney in New York State since 1988.
William B. Roberts has been a
director of the Company since its formation in March 1991. Since
1981, he has been the President of Monmouth Capital Corp., an investment firm
that specializes in management buyouts.
John C. Warner was elected as
a director of the Company in April 2003. Mr. Warner was chief
executive officer of O'Neill Clothing, a manufacturer and marketer of apparel
and accessories, from 1996 until his retirement in May 2005.
Gregory S. Washer has been a
director of the Company since June 2007. He has been the owner and
president of Clean Fun Promotional Marketing LLC, a promotional marketing
company, since its founding in 1986.
Daniel S. Wood has been a
director of the Company since July 2001. Mr. Wood was president of
Carclo Technical Plastics, a manufacturer of custom injection moldings, until
his retirement in April 2007. He now serves as a consultant to that
company. Previously, from 1988 to September 2000, he was the chief
operating officer and co-owner of Carrera Corporation, the predecessor to the
business of Carclo Technical Plastics.
The Board
of Directors has established an Audit Committee, a Compensation and Stock Option
Committee, and a Nominating Committee. Each of these three committees
operates under a written charter, adopted by the Board of Directors of the
Company. The charters are available on the Company’s website, www.consumerportfolio.com. The
Board of Directors has concluded that each member of these three committees
(every director other than Mr. Bradley, the Company's chief executive officer),
is independent in accordance with the director independence standards prescribed
by Nasdaq, and has determined that none of them have a material relationship
with the Company that would impair their independence from management or
otherwise compromise the ability to act as an independent director.
The
members of the Audit Committee are E. Bruce Fredrikson (chairman), John C.
Warner and Daniel S. Wood. The Audit Committee is empowered by the Board of
Directors to review the financial books and records of the Company in
consultation with the Company's accounting and auditing staff and its
independent auditors and to review with the accounting staff and independent
auditors any questions that may arise with respect to accounting and auditing
policy and procedure.
The Board
of Directors has further determined that Mr. Fredrikson has the qualifications
and experience necessary to serve as an "audit committee financial expert" as
such term is defined in Item 401(h) of Regulation S-K promulgated by
the SEC. Such qualifications and experience are described above in
this section.
The
members of the Compensation and Stock Option Committee are Mr. Wood (chairman),
William B. Roberts and Gregory S. Washer. This Committee makes
determinations as to general levels of compensation for all employees of the
Company and the annual salary of each of the executive officers of the Company,
and administers the Company's compensation plans. Those plans include
the Company's 1997 Long-Term Stock Incentive Plan, the Executive Management
Bonus Plan, and the CPS 2006 Long-Term Equity Incentive Plan.
The
members of the Nominating Committee are Brian J. Rayhill (chairman), Chris A.
Adams and Mr. Fredrikson. Nominations for board positions are made on behalf of
the Board of Directors by the nominating committee. Because neither
the Board of Directors nor its Nominating Committee has received recommendations
from shareholders as to nominees, the Board of Directors and the Nominating
Committee believe that it is and remains appropriate to operate without a formal
policy with regard to any director candidates who may in the future be
recommended by shareholders. The nominating committee would consider
such recommendations.
When
considering a potential nominee, the nominating committee considers the benefits
to the Company of such nomination, based on the nominee's skills and experience
related to managing a significant business, the willingness and ability of the
nominee to serve, and the nominee's character and reputation.
Shareholders
who wish to suggest individuals for possible future consideration for board
positions, or to otherwise communicate with the Board of Directors, should
direct written correspondence to the corporate secretary at the Company's
principal executive offices, indicating whether the shareholder wishes to
communicate with the nominating committee or with the Board of Directors as a
whole. The present policy of the Company is to forward all such
correspondence to the designated members of the Board of
Directors. There have been no changes in the procedures regarding
shareholder recommendations in the past year.
Section
16(a) Beneficial Ownership Reporting Compliance
Directors,
executive officers and holders of in excess of 10% of the Company's common stock
are required to file reports concerning their transactions in and holdings of
equity securities of the Company. Based on a review of reports filed
by each such person, and inquiry of each regarding holdings and transactions,
the Company believes that all reports required with respect to the year 2008
were timely filed.
Code
of Ethics
The
Company has adopted a Code of Ethics for Senior Financial Officers, which
applies to the Company's chief executive officer, chief financial officer,
controller and others. A copy of the Code of Ethics may be obtained
at no charge by written request to the Corporate Secretary at the Company's
principal executive offices.
Meetings
of the Board
The Board
of Directors held seven meetings (including regular and special meetings) and
acted twice by written consent during 2008. The Audit Committee met
six times during 2008, including at least one meeting per quarter to review
the Company's financial statements, and acted one time by written consent, while
the Compensation and Stock Option Committee met four times during 2008 and did
not act by written consent. The Nominating Committee met once during
2008 and did not act by written consent. Each nominee attended at
least 75% of the meetings of the Board of Directors and its committees that such
individual was eligible to attend in 2008. The Company does not have
a policy of encouraging directors to attend or discouraging directors from
attending its annual meetings of shareholders. Other than Mr.
Bradley, no directors attended last year’s annual meeting of
shareholders.
The
following table summarizes all compensation earned during the three fiscal years
ended December 31, 2008 and 2007 by the Company's chief executive officer and by
the two other most highly compensated individuals (such three individuals, the
"named executive officers") who were serving in such position or as executive
officers at any time in 2008.
Summary
Compensation Table
|
Name
and Principal Position
|
Year
|
|
Salary
|
|
|
Bonus
|
|
|
Option
Awards (1)
|
|
|
All
Other
Compensation (2)
|
|
|
Total
|
|
|
Charles
E. Bradley, Jr.
|
2008
|
|
$ |
880,000 |
|
|
$ |
1,056,000 |
|
|
$ |
67,244 |
|
|
|
2,100 |
|
|
$ |
2,005,344 |
|
|
President
& Chief
|
2007
|
|
|
840,000 |
|
|
|
1,500,000 |
|
|
|
561,864 |
|
|
|
2,100 |
|
|
|
2,903,964 |
|
|
Executive
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey
P. Fritz
|
2008
|
|
|
317,000 |
|
|
170,000
|
|
|
|
33,622 |
|
|
|
2,100 |
|
|
|
522,722 |
|
|
Sr.
Vice President – Accounting
|
2007
|
|
|
305,000 |
|
|
|
212,000 |
|
|
|
93,122 |
|
|
|
2,100 |
|
|
|
612,222 |
|
|
&
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chris
Terry
|
2008
|
|
|
319,000 |
|
|
182,000
|
|
|
|
33,622 |
|
|
|
2,100 |
|
|
|
536,722 |
|
|
Sr.
Vice President –
|
2007
|
|
|
307,000 |
|
|
|
229,000 |
|
|
|
93,122 |
|
|
|
2,100 |
|
|
|
631,222 |
|
|
Servicing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents
the dollar value of accrued for financial accounting purposes in
connection with the grant of such
options
|
|
(2)
|
Amounts
in this column represent (a) any Company contributions to the Employee
Savings Plan (401(k) Plan), and (b) premiums paid by the Company for group
life insurance, as applicable to the named executive officers. Company
contributions to the 401(k) Plan were $1500 per individual in 2007 and
2008.
|
The
Company in the year ended December 31, 2008, did not grant any stock awards or
stock appreciation rights to any of the named executive officers. The
Company granted options to substantially all of its management level employees
on January 30, 2008. The option grants noted in the above table were
awarded to the named executive officers as part of that general
grant. The chief executive officer received an option to purchase up
to 40,000 shares of the Company's common stock at the market closing price
($3.18 per share) on the date of grant, with such right to purchase to become
exercisable in increments of 20% on each of the first through fifth
anniversaries of the grant date, and to expire on the tenth
anniversary. Each of the other seven executive officers of the
Company (including the named executive officers) received a grant on the same
terms, with respect to up to 20,000 shares.
The
salary and bonus of the named executive officers are determined by the
Compensation Committee. The compensation appearing in the table above under the
caption "bonus" is paid pursuant to an executive management bonus plan (the “EMB
Plan”). The EMB Plan is administered by the Compensation Committee.
Among other things, the Compensation Committee selects participants in the EMB
Plan from among the Company’s executive officers and determines the performance
goals, target amounts and other terms and conditions of awards under the EMB
Plan. With respect to officers other than the chief executive officer,
determinations of base salary and of criteria relating to the EMB Plan are based
in part on evaluations of such officers prepared by the chief executive officer,
which are furnished to and discussed with the Compensation
Committee.
The
Company's officers do not participate in any pension or retirement plan, other
than a tax-qualified defined contribution plan (commonly known as a 401(k)
plan). Each of the named executive officers is employed "at will" by the
Company, and none has an employment contract. The Compensation
Committee has considered entering into agreements
with one or more of the Company's officers that might pay additional
compensation following a change in control, and may authorize such agreement(s)
in the future, but no such agreements are in place as of the date of this
report.
Outstanding Equity Awards at Fiscal
Year-end
The
following table sets forth as of December 31, 2008 the number of unexercised
options held by each of the named executive officers, the number of shares
subject to then exercisable and unexercisable options held by such
persons
and the exercise price and expiration date of each such option. Each
option referred to in the table was granted under the Company's 1991 Stock
Option Plan, 1997 Long-Term Incentive Plan or 2006 Long-Term Equity Incentive
Plan, at an option price per share no less than the fair market value per share
on the date of grant. None of such individuals holds a stock award.
|
|
|
Number
of shares underlying unexercised options (#) exercisable
|
|
|
Number
of shares underlying unexercised options (#) unexercisable
|
|
|
Option
exercise price ($/share)
|
|
Option
expiration date
|
|
Charles
E. Bradley, Jr.
|
|
|
11,100 |
|
|
|
0 |
|
|
$ |
0.625 |
|
October
29, 2009
|
|
|
|
|
250,000 |
|
|
|
0 |
|
|
|
1.75 |
|
September
21, 2010
|
|
|
|
|
83,333 |
|
|
|
0 |
|
|
|
1.75 |
|
September
21, 2010
|
|
|
|
|
83,333 |
|
|
|
0 |
|
|
|
2.50 |
|
January
17, 2011
|
|
|
|
|
83,333 |
|
|
|
0 |
|
|
|
4.25 |
|
January
17, 2011
|
|
|
|
|
185,000 |
|
|
|
0 |
|
|
|
1.50 |
|
July
23, 2012
|
|
|
|
|
40,000 |
|
|
|
0 |
|
|
|
2.64 |
|
July
17, 2013
|
|
|
|
|
240,000 |
|
|
|
0 |
|
|
|
4.00 |
|
April
26, 2014
|
|
|
|
|
120,000 |
|
|
|
0 |
|
|
|
5.04 |
|
May
16, 2015
|
|
|
|
|
40,000 |
|
|
|
0 |
|
|
|
6.00 |
|
December
30, 2015
|
|
|
|
|
32,000 |
|
|
|
48,000 |
|
|
|
6.85 |
|
October
25, 2016
|
|
|
|
|
48,000 |
|
|
|
32,000 |
|
|
|
6.91 |
|
February
27, 2017
|
|
|
|
|
8,000 |
|
|
|
32,000 |
|
|
|
5.26 |
|
July
30, 2017
|
|
|
|
|
0 |
|
|
|
40,000 |
|
|
|
3.18 |
|
January
30, 2018
|
|
Jeffrey
P. Fritz
|
|
|
80,000 |
|
|
|
0 |
|
|
|
4.25 |
|
November
12, 2014
|
|
|
|
|
80,000 |
|
|
|
0 |
|
|
|
5.04 |
|
May
16, 2015
|
|
|
|
|
20,000 |
|
|
|
0 |
|
|
|
6.00 |
|
December
30, 2015
|
|
|
|
|
16,000 |
|
|
|
24,000 |
|
|
|
6.85 |
|
October
25, 2016
|
|
|
|
|
4,000 |
|
|
|
6,000 |
|
|
|
6.91 |
|
February
27, 2017
|
|
|
|
|
4,000 |
|
|
|
16,000 |
|
|
|
5.26 |
|
July
30, 2007
|
|
|
|
|
0 |
|
|
|
20,000 |
|
|
|
3.18 |
|
January
30, 2018
|
|
Chris
Terry
|
|
|
5000 |
|
|
|
0 |
|
|
|
1.75 |
|
September
21, 2010
|
|
|
|
|
5000 |
|
|
|
0 |
|
|
|
2.50 |
|
January
17, 2011
|
|
|
|
|
5000 |
|
|
|
0 |
|
|
|
4.25 |
|
January
17, 2011
|
|
|
|
|
27,500 |
|
|
|
0 |
|
|
|
1.50 |
|
July
23, 2012
|
|
|
|
|
30,000 |
|
|
|
0 |
|
|
|
1.92 |
|
February
3, 2013
|
|
|
|
|
20,000 |
|
|
|
0 |
|
|
|
2.64 |
|
July
17, 2013
|
|
|
|
|
20,000 |
|
|
|
0 |
|
|
|
4.00 |
|
April
26, 2014
|
|
|
|
|
20,000 |
|
|
|
0 |
|
|
|
5.04 |
|
May
16, 2015
|
|
|
|
|
46,000 |
|
|
|
0 |
|
|
|
6.00 |
|
December
30, 2015
|
|
|
|
|
16,000 |
|
|
|
24,000 |
|
|
|
6.85 |
|
October
25, 2016
|
|
|
|
|
4,000 |
|
|
|
6,000 |
|
|
|
6.91 |
|
February
27, 2017
|
|
|
|
|
4,000 |
|
|
|
16,000 |
|
|
|
5.26 |
|
July
30, 2017
|
|
|
|
|
0 |
|
|
|
20,000 |
|
|
|
3.18 |
|
January
30, 2018
|
Director
Compensation
The
Company pays all non-employee directors a retainer of $3,000 per month, with an
additional fee of $500 per month for service on a board committee ($1,000 for a
committee chairman). Non-employee directors also receive per diem fees of $1,000 for
attendance in person at meetings of the board of directors, or $500 for
attendance by telephone. No per diem fees are paid for
attendance at committee meetings. Pursuant to the Company's policy
that is applicable to all of its non-employee members, the Board on January 30,
2008, issued options with respect to 10,000 shares to each non-employee
director. All such options are exercisable at $3.18 per share, the
exercise price being the closing price on the date of grant. The following
table summarizes compensation received by the Company’s directors for the year
2008:
|
Name
of Director
|
|
Fees
Earned or Paid in Cash (1)
|
|
|
Option
Awards (2)
|
|
|
Total
|
|
Charles
E. Bradley, Jr. (3)
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Chris
A. Adams
|
|
$ |
47,500 |
|
|
$ |
8,161 |
|
|
$ |
55,661 |
|
E.
Bruce Fredrikson
|
|
$ |
65,500 |
|
|
$ |
8,161 |
|
|
$ |
73,661 |
|
Brian
J. Rayhill
|
|
$ |
65,500 |
|
|
$ |
8,161 |
|
|
$ |
73,661 |
|
William
B. Roberts
|
|
$ |
52,500 |
|
|
$ |
8,161 |
|
|
$ |
60,661 |
|
John
C. Warner
|
|
$ |
52,500 |
|
|
$ |
8,161 |
|
|
$ |
60,661 |
|
Gregory
S. Washer
|
|
$ |
59,000 |
|
|
$ |
8,161 |
|
|
$ |
67,161 |
|
Daniel
S. Wood
|
|
$ |
71,500 |
|
|
$ |
8,161 |
|
|
$ |
79,661 |
(1)
This column reports the amount of cash compensation earned in 2008 for Board and
committee service.
(2)
This column represents the dollar amount recognized for financial statement
reporting purposes with respect to the 2008 fiscal year for the fair value of
stock options granted to the directors in 2008. The fair value was
estimated using the Black-Scholes option-pricing model in accordance with SFAS
123R. The weighted average fair value per option was $0.82, based on
assumptions of 2.0 years expected life, expected volatility of 43%, expected
dividend yield of 0.0%, and a risk-free rate of 2.48%. In addition to
the stock option awards granted in 2008, the several directors held at December
31, 2008 option awards granted in previous years, for totals as follows: Mr.
Bradley, 14 awards; Mr. Adams, two; Mr. Fredrikson, seven; Mr. Rayhill, four;
Mr. Roberts, three; Mr. Warner, seven; Mr. Washer, three; and Mr. Wood,
seven.
(3)
Mr. Bradley's compensation as chief executive officer of the Company is
described elsewhere in this report. He received no additional
compensation for service on the Company's Board of Directors.
The table
below sets forth the number and percentage of shares of the Company’s Common
Stock (its only class of voting securities) owned beneficially as of the April
20, 2009, by (i) each person known to the Company to own beneficially more than
5% of the outstanding Common Stock, (ii) each director or named executive
officer of the Company, and (iii) all directors and executive officers of the
Company as a group. Except as otherwise indicated, and subject to applicable
community property and similar laws, each of the persons named has sole voting
and investment power with respect to the shares shown as beneficially owned by
such persons. Except as otherwise noted, each person named in the
table has a mailing address at 19500 Jamboree Road, Irvine, CA
92612.
|
Name
and Address of Beneficial Owner
|
|
Amount
and Nature of Beneficial Ownership (1)
|
|
Percent
of
Class
|
|
|
Charles
E. Bradley, Jr.
|
|
2,650,408 |
|
|
|
|
14.1 |
% |
|
Chris
A. Adams
|
|
54,000 |
|
|
|
|
* |
|
|
E.
Bruce Fredrikson
|
|
110,000 |
|
|
|
|
* |
|
|
Brian
J. Rayhill
|
|
115,000 |
|
|
|
|
* |
|
|
William
B. Roberts
|
|
939,107 |
|
|
|
|
5.0 |
% |
|
John
C. Warner
|
|
105,000 |
|
|
|
|
* |
|
|
Gregory
S. Washer
|
|
127,550 |
|
|
|
|
* |
|
|
Daniel
S. Wood
|
|
137,000 |
|
|
|
|
* |
|
|
Jeffrey
P. Fritz
|
|
208,000 |
|
|
|
|
1.1 |
% |
|
Chris
Terry
|
|
249,041 |
|
|
|
|
1.3 |
% |
|
All
directors and executive officers combined (15 persons)
|
|
5,822,094 |
|
|
(2 |
) |
|
|
|
Citigroup
Financial Products Inc., 388 Greenwich Street, New York, NY
10013
|
|
2,508,113 |
|
|
(3 |
) |
13.3 |
% |
|
Levine
Leichtman Capital Partners IV, L.P., 335 N. Maple Drive, Suite 240,
Beverly Hills, CA 90210
|
|
3,073,309 |
|
|
(4 |
) |
16.3 |
% |
|
Millenco
LLC, 666 Fifth Ave., New York, NY 10103
|
|
1,469,618 |
|
|
(5 |
) |
7.8 |
% |
|
Dimensional
Fund Advisors LP, 1299 Ocean Ave., Santa Monica, CA 90401
|
|
1,102,850 |
|
|
(6 |
) |
5.9 |
% |
|
Whitebox
Advisors LLC, 3033 Excelsior Boulevard, Suite 300, Minneapolis, MN
55416
|
|
1,137,957 |
|
|
(7 |
) |
6.0 |
% |
* Less
than 1.0%
|
(1)
|
Includes
certain shares that may be acquired within 60 days after April 20, 2009
from the Company upon exercise of options, as follows: Mr.
Bradley, 1,232,099 shares; Mr. Adams, 40,000 shares; Mr. Fredrikson,
90,000 shares; Mr. Rayhill, 95,000 shares; Mr. Roberts, 45,000
shares; Mr. Warner, 105,000 shares; Mr. Washer, 55,000 shares; Mr. Wood,
85,000 shares; Mr. Fritz, 208,000 shares; and Mr. Terry, 206,500
shares. The calculation of beneficial ownership also includes,
in the case of the executive officers, an approximate number of shares
each executive officer could be deemed to hold through contributions made
to the Company's Employee 401(k) Plan (the "401(k) Plan"). The
401(k) Plan provides an option for all participating employees to purchase
stock in the Company indirectly by buying units in a mutual
fund. Each "unit" in the mutual fund represents an interest in
Company stock, cash and cash
equivalents.
|
|
(2)
|
Includes
2,940,099 shares that may be acquired within 60 days after April 20, 2009,
upon exercise of options and conversion of convertible
securities.
|
|
(3)
|
Based
on a report on Schedule 13G filed by Citigroup Financial Products Inc. on
February 9, 2009.
|
|
(4)
|
Based
on a report on Schedule 13D filed by Levine Leichtman Capital Partners IV,
L.P. on September 26, 2008.
|
|
(5)
|
Based
on a report on Schedule 13G filed by Millenco LLC on February 12,
2009.
|
|
(6)
|
Based
on a report on Schedule 13G filed by Dimensional Fund Advisors LP on
February 9, 2009.
|
|
(7)
|
Based
on a report on Schedule 13G filed by Whitebox Advisors LLC on February 17,
2009.
|
The table
below presents information regarding securities authorized for issuance under
equity compensation plans, including the CPS 2006 Long-Term Equity Incentive
Plan, as of December 31, 2008.
|
|
|
|
Number
of Securities
|
|
|
|
|
Remaining
Available for
|
|
|
Number
of Securities
|
|
Future
Issuance Under
|
|
|
to
be Issued Upon
|
Weighted-Average
|
Equity
Compensation
|
|
|
Exercise
of
|
Exercise
Price of
|
Plans
(excluding securities
|
|
Plan
Category
|
Outstanding
Options
|
Outstanding
Options
|
reflected
in first column)
|
|
Plans
approved by stockholders
|
6,319,999
|
|
$ |
4.35
|
|
2,435,000
|
|
Plans
not approved by stockholders
|
None
|
|
|
N/A
|
|
N/A
|
|
Total
|
6,319,999
|
|
$ |
4.35
|
|
2,435,000
|
Audit
Committee Report
The Audit
Committee reviews the Company's financial reporting process on behalf of the
Board and meets at least once per quarter to review the Company’s financial
statements. The Audit Committee acts pursuant to a written charter
adopted by the Board of Directors. Management has the primary
responsibility for the financial statements and the reporting
process. The Company's independent auditors are responsible for
expressing an opinion on the conformity of the Company's audited financial
statements to accounting principles generally accepted in the United States of
America.
In this
context, the Audit Committee reviewed and discussed with management and the
independent auditors the audited financial statements for the year ended
December 31, 2008 (the "Audited Financial Statements"). The Audit
Committee has discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with
Audit Committees). In addition, the Audit Committee has received from
the independent auditors the written disclosures required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees)
and discussed with them their independence from the Company. Based on
the reviews and discussions referred to above, the Audit Committee recommended
to the Board that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2008, for filing with
the Securities and Exchange Commission.
The Audit
Committee members do not serve as professional accountants or auditors and their
functions are not intended to duplicate or to certify the activities of
management and the independent auditors. The Committee serves a
board-level oversight role where it receives information from, consults with,
and provides its views and directions to, management and the independent
auditors on the basis of the information it receives and the experience of its
members in business, financial and accounting matters. Pursuant to
the terms of its charter, the Audit Committee approves the engagement of
auditing services and permitted non-audit services including the related fees
and general terms. Mr. Fredrikson, chairman of the Audit Committee,
is considered by the Board of Directors to have the qualifications and
experience necessary to serve as an "audit committee financial
expert."
E. Bruce
Fredrikson (chairman)
John C.
Warner
Daniel S.
Wood
Citigroup. On July
10, 2008, the Company and its wholly owned subsidiary Folio Funding II, LLC, as
borrower, agreed with Citigroup Financial Products, Inc. (“CGFP”) to amend and
restate the agreements governing a pre-existing revolving residual credit
facility. CGFP is the note purchaser and administrative agent of that credit
facility.
Under
the original residual facility, the Company sold eligible residual interests in
securitizations to the borrower, which in turn pledged the residuals as
collateral for floating rate borrowings from the note purchaser. The amount
available for borrowing was computed by the administrative agent using a
valuation methodology of the residuals, and was subject to an overall maximum
principal amount of $120 million. The indebtedness of the borrower was
represented by (i) a $60 million Class A-1 Variable Funding Note, and (ii) a $60
million Class A-2 Term Note. The facility's revolving feature was to expire by
its terms on July 10, 2008, and the Class A-1 Note was to be due at that time.
The Class A-2 Note was to be due on July 10, 2009.
With the
amendments to this facility, the Company prepaid a portion of the outstanding
notes, reducing the outstanding principal balance to $70 million, and the notes
were re-designated as (i) a $10 million Class A-1 Term Note, and (ii) a $60
million Class A-2 Term Note. Approximately $4 million of the principal
prepayment represented the agreed value of a warrant to purchase (for
nominal consideration) 2,500,000 shares of Company common stock, which warrant
was issued to an affiliate of CGFP, and was subsequently transferred to CGFP.
The Class A-1 Term Note and Class A-2 Term Note provide for minimum required
levels of amortization, and are due in June 2009. However, the Company also
received an option, if certain conditions are met, to extend the maturity for an
additional year to June 2010.
The
maximum principal amount of such indebtedness to CGFP during 2008 was $90
million. During 2008, the Company paid $22.7 million of principal and
$8,595,970 of interest on the debt, and has since paid additional principal
to reduce the amount outstanding to $65.25 million as of March 31,
2009. Interest on such indebtedness accrues at a floating rate,
computed as 30-day LIBOR plus 10.875%.
On
September 26, 2008, the Company sold approximately $198.7 million in adjusted
principal amount of automobile purchase receivables to its wholly owned
subsidiary CALT SPE, LLC, which then transferred those receivables to Auto Loan
Trust, a Delaware statutory trust. The purchase price was funded by
Auto Loan Trust's issuance and sale of structured notes. An affiliate of CGFP
purchased 95% of the notes, and the Company purchased the remaining
5%.
Levine Leichtman Capital
Partners. On June 30, 2008, the Company entered into a
Securities Purchase Agreement and related agreements pursuant to which Levine
Leichtman Capital Partners IV, L.P (“LLCP”) purchased a $10 million five-year
note issued by the Company. The indebtedness to LLCP is secured by substantially
all of the Company’s assets, though not by the assets of its special-purpose
financing subsidiaries. Certain other subsidiaries (CPS Marketing, Inc., CPS
Leasing, Inc., Mercury Finance Company LLC and TFC Enterprises LLC) have
guarantied the Company’s obligations to LLCP.
In
connection with the Securities Purchase Agreement, the Company paid to LLCP a
closing fee of $1.1 million and issued to LLCP (i) 1,225,000 shares of the
Company’s common stock, (ii) a warrant that represented the right to purchase,
at the time of issuance, 275,000 shares of the Company’s common stock, at a
nominal exercise price, and (iii) a warrant that represented the right to
purchase, at the time of issuance, 1,500,000 shares of the Company’s common
stock, at an exercise price of $2.573 per share. The number of shares
subject to each warrant and the exercise price of each warrant are subject to
certain adjustments contained in the warrants. Exercise of the
warrants was contingent upon the Company’s obtaining the approval of its
shareholders, which was obtained on September 16, 2008.
Pursuant
to the anti-dilution provisions of the LLCP warrants, the Company’s July 10
transactions with CGFP, described above, resulted in a change in the number of
shares issuable upon exercise of the first warrant from 275,000 to 283,985, and
upon exercise of the second LLCP warrant from 1,500,000 to
1,564,324. The exercise price of the second LLCP warrant was also
adjusted, from $2.573 per share to $2.4672 per share.
Under the
Securities Purchase Agreement, subject to the satisfaction of certain terms and
conditions, LLCP also agreed to purchase an additional $15 million note to be
issued by the Company. That obligation was subject to a number of conditions
being satisfied, including, without limitation, a successful amendment and
restatement of the Company’s indebtedness to CGFP, described above. Those
conditions were satisfied and the additional note was issued on July 10, 2008.
The additional note has substantially the same terms as the $10 million
note.
In
connection with the Securities Purchase Agreement, the Company entered into an
Investor Rights Agreement with LLCP that granted LLCP certain monitoring and
other rights, including the right to cause an individual designated by LLCP to
be nominated and elected to the Company’s board of directors. In
addition, the Investor Rights Agreement granted to LLCP rights of first refusal
with respect to future issuances of equity securities by the Company and
contains restrictions on the Company’s ability (and the ability of the Company’s
subsidiaries) to issue equity securities.
The
maximum principal amount of indebtedness to LLCP during 2008 was $25
million. During 2008, the Company paid no principal and
$2,533,000 of interest on the debt. As of March 31, 2009, the
principal amount owed remains $25 million. Interest on such indebtedness
accrues at a fixed rate of 16% per year.
Affiliates
of LLCP have purchased other senior secured debt securities from the Company,
and have held as much as 4.5 million shares of the Company's common stock, at
various times prior to the transactions described above. No such debt securities
had been outstanding since July 2007, and no such shares had been held since
December 2007. LLCP or its affiliates may in the future provide the Company
with financial advisory or other services, for which it or they may receive
compensation in such amounts and forms as may be determined by
negotiation.
CPS Leasing. The Company
holds 80% of the outstanding shares of the capital stock of CPS Leasing, Inc.
("CPSL"). The remaining 20% of CPSL is held by Charles E. Bradley,
Jr., who is the chief executive officer and chairman of the board of directors
of the Company. CPSL engaged in the equipment leasing business, and
is currently in the process of liquidation as its leases come to
term. The Company financed the operations of CPSL by making
operating advances and by advancing to CPSL the fraction of the purchase prices
of its leased equipment that CPSL did not borrow under its lines of
credit. The aggregate amount of advances made by the Company to CPSL
as of December 31, 2008, is approximately $474,000.
Employee Indebtedness. To assist certain
officers in exercising stock options, the Company or a subsidiary lent to such
officers the exercise price of options such officers exercised in May and July
2002. The loans accrued interest at 5.50% per annum, which compounded
annually. The entire principal and accrued interest was due in July
2007. The chief executive officer (Mr. Bradley), one executive
officer (Mr. Terry), and four officers other than executive officers
borrowed money on those terms. One of the other officers (Teri L.
Clements) was promoted to an executive officer position in April
2007. At December 31, 2007 there was $383,000 outstanding related to
three such loans. Two of the loans were repaid during 2008 with
cash. The third was repaid on August 5, 2008 by surrender to the
Company of 210,000 shares of Company common stock. At December 31,
2008, all such loans have been repaid. Pursuant to the Sarbanes-Oxley
Act of 2002, the Company has ceased providing any loans to its executive
officers.
Public Offering of Subordinated
Notes. The
Company is engaged in an ongoing offering to the public of subordinated notes.
Director William Roberts on December 3, 2007 purchased $4,000,000 of three-year
notes directly from the Company in that offering. The Company in 2008
paid interest of $601,513 on such notes, in accordance with their terms. The
interest rate on such notes of 14.91% per annum, and the yield paid to the
noteholder is computed by compounding that rate on a daily basis. The rate was
determined by negotiation, and is consistent with rates then available to other
purchasers in the offering.
Policy on Related Party
Transactions. The agreements and transactions described above, other than
those described under the captions “Citigroup” and “Levine Leichtman
Capital Partners,” were entered into by the Company with parties who personally
benefited from such transactions and who had a control or fiduciary relationship
with the Company. It is the Company's policy that any such
transactions with persons having a control or fiduciary relationship with the
Company may take place only if approved by the Audit Committee or by the members
of the Company's Board of Directors who are disinterested with respect to the
transaction, and independent in accordance with the standards for director
independence prescribed by Nasdaq. Such policy is maintained in
writing in the charter of the Audit Committee. The agreements and
transactions above were reviewed and approved by the members of the Company's
Board of Directors who are disinterested with respect to the transaction, except
that the subordinated notes transaction was reviewed and approved by the Audit
Committee. The Company has determined that each of its nonemployee
directors (Messrs. Adams, Fredrikson, Rayhill, Roberts, Warner, Washer and Wood,
of whom Messrs. Fredrikson, Warner and Wood compose the Audit Committee) is
independent in accordance with Nasdaq standards.
The
Audit Committee of the Board of Directors has appointed the accounting firm of
Crowe Horwath, LLP ("Crowe") to be the Company's independent auditors for the
year ending December 31, 2009. Crowe also performed the audit of the
Company's financial statements for the year ended December 31, 2008. The Company
retained Crowe for that purpose on February 6, 2009. The former principal
accountant, McGladrey & Pullen LLP (“McGladrey”), had served as the
Company's principal accountant since October 21, 2004, and performed certain
attestation services for the Company during the year ended December 31, 2008,
notably the review of the financial statements included in the Company's three
quarterly reports on Form 10-Q filed in 2008.
Information
relating to the fees billed by those firms to the Company appears
below.
Audit
Fees
The
aggregate fees billed by Crowe for professional services rendered for the audit
of the Company's annual financial statements for the fiscal year ended December
31, 2008 were $625,000.
The
aggregate fees billed by McGladrey for professional services rendered as part of
or for the audit of the Company's annual financial statements for the fiscal
year ended December 31, 2008 and 2007, for the review of the financial
statements included in the Company's quarterly reports on Form 10-Q filed in
2008 and 2007, and for services that are normally provided by the auditor in
connection with statutory or regulatory filings or engagements in those two
years were $325,000 and $971,000, respectively. It should be noted
that McGladrey, though not retained to perform the audit of the Company's annual
financial statements for the year ended December 31, 2008, did perform quarterly
review of the financial statements included in the Company's three quarterly
reports on Form 10-Q filed in 2008.
Audit-Related
Fees
Crowe
performed for the Company no audit-related services in the fiscal years ended
December 31, 2008 and 2007.
The
aggregate fees billed by McGladrey for audit-related services for the fiscal
years ended December 31, 2008 and 2007 were $52,550 and $316,000,
respectively. These professional services were rendered in
conjunction with the Company's securitization and financing transactions, and
consultations concerning financial accounting and reporting
standards.
Tax
Fees
Crowe
performed for the Company no tax services in the fiscal years ended December 31,
2008 and 2007.
The
aggregate fees billed by McGladrey for tax services in the fiscal years ended
December 31, 2008 and 2007 were $600,790 and $570,000,
respectively. Tax services provided by McGladrey consisted of
preparation of various state and federal income tax returns for the Company and
its subsidiaries.
All
Other Fees
No other
fees were billed by Crowe or McGladrey in the fiscal years ended December 31,
2008 and December 31, 2007.
Audit
Committee Supervision of Principal Accountant
The Audit
Committee acts pursuant to a written charter adopted by the Board of
Directors. Pursuant to the charter, the Audit Committee pre-approves
the audit and permitted non-audit fees to be paid to the independent auditor,
and authorizes on behalf of the Company the payment of such fees, or refuses
such authorization. The Audit Committee has delegated to its chairman
and its vice-chairman the authority to approve performance of services on an
interim basis. In the fiscal years ended December 31, 2008 and December 31,
2007, all services for which audit fees or audit related fees were paid were
preapproved by the Audit Committee as a whole, or pursuant to such delegated
authority.
In the
course of its meetings, the Audit Committee has considered whether the provision
of the non-audit fees outlined above is compatible with maintaining the
independence of the respective audit firms, and has concluded that such
independence is not impaired.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has caused this amendment to report to be signed on its
behalf by the undersigned, thereunto duly authorized.
|
|
|
CONSUMER PORTFOLIO SERVICES,
INC. (registrant)
|
|
April
30, 2009
|
|
By:
|
/s/
JEFFREY P. FRITZ
|
|
|
|
|
Jeffrey
P. Fritz, Sr. Vice President
|