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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
---------------
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
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 1-9910
WESTCORP EMPLOYEE STOCK OWNERSHIP AND SALARY SAVINGS PLAN
(FULL TITLE OF THE PLAN)
--------------
WESTCORP
23 PASTEUR
IRVINE, CALIFORNIA 92718-3804
(NAME OF ISSUER OF THE SECURITIES HELD PURSUANT
TO THE PLAN AND THE ADDRESS OF ITS
PRINCIPAL EXECUTIVE OFFICE)
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REQUIRED INFORMATION
1. Not Applicable.
2. Not Applicable.
3. Not Applicable.
4. Westcorp Employee Stock Ownership and Salary Savings Plan (the "Plan")is
subject to the requirements of the Employee Retirement Income Security
Act of 1974 ("ERISA"). Attached hereto is a copy of the most recent
financial statements and schedules of the Plan prepared in accordance
with the financial reporting requirements of ERISA.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Westcorp Employee Stock Ownership and Salary Savings Plan has duly caused this
Annual Report to be signed by the undersigned thereunto duly authorized.
WESTCORP EMPLOYEE STOCK OWNERSHIP
AND SALARY SAVINGS PLAN
By: /s/ LEE A. WHATCOTT
---------------------------------
Lee A. Whatcott
July 1, 2002
AUDITED FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULE
Westcorp Employee Stock Ownership and Salary Savings Plan
Year ended December 31, 2001
with Report of Independent Auditors
Westcorp
Employee Stock Ownership and Salary Savings Plan
Audited Financial Statements and Supplemental Schedule
Year ended December 31, 2001
CONTENTS
Report of Independent Auditors......................................................1
Audited Financial Statements
Statements of Net Assets Available for Benefits at December 31, 2001 and 2000.......2
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 2001............................................3
Notes to Financial Statements.......................................................4
Supplemental Schedule
Schedule H, Line 4i -- Schedule of Assets (Held at End of Year)....................10
[ERNST & YOUNG LLP LETTERHEAD]
Report of Independent Auditors
Plan Committee
Westcorp Employee Stock Ownership and Salary Savings Plan
We have audited the accompanying statements of net assets available for benefits
of the Westcorp Employee Stock Ownership and Salary Savings Plan as of December
31, 2001 and 2000, and the related statement of changes in net assets available
for benefits for the year ended December 31, 2001. 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. 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 at
December 31, 2001 and 2000, and the changes in its net assets available for
benefits for the year ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of assets
(held at end of year) as of December 31, 2001, is presented for purposes of
additional analysis and is not a required part of the 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 our audits of the financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.
/s/ ERNST & YOUNG LLP
June 20, 2002
1
Westcorp
Employee Stock Ownership and Salary Savings Plan
Statements of Net Assets Available for Benefits
DECEMBER 31,
----------------------------
2001 2000
----------- -----------
ASSETS
Investments at fair value:
Cash and short-term investments $ 4,489,867 $ 2,316,166
Westcorp common stock 38,167,168 28,266,664
Mutual funds 16,515,896 15,658,208
Government National Mortgage Association securities 26,195
Loans to participants 744,273 726,586
----------------------------
Total investments 59,917,204 46,993,819
Employee deferrals receivable 185,413 285,323
Employer contribution receivable 1,816,010
----------------------------
Total receivables 185,413 2,101,333
----------------------------
Net assets available for benefits $60,102,617 $49,095,152
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See accompanying notes.
2
Westcorp
Employee Stock Ownership and Salary Savings Plan
Statement of Changes in Net Assets Available for Benefits
FOR THE YEAR
ENDED
DECEMBER 31,
2001
------------
ADDITIONS
Contributions:
Employee $ 5,649,410
Employer 6,499,286
Net transfers and exchanges 551,988
Net investment income:
Interest income 67,460
Dividends 1,333,772
Net realized/unrealized appreciation 3,689,343
-----------
Total additions 17,791,259
DEDUCTIONS
Benefit and withdrawal payments to participants 6,783,657
Administration fees 137
-----------
Total deductions 6,783,794
-----------
Net increase 11,007,465
Net assets available for benefits:
Beginning of year 49,095,152
-----------
End of year $60,102,617
===========
See accompanying notes.
3
Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements
December 31, 2001
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The Westcorp Employee Stock Ownership and Salary Savings
Plan ("the Plan") is for the benefit of all eligible employees of Westcorp ("the
Company"), its wholly owned subsidiaries, Westran Services Corp., and Western
Financial Bank ("the Bank"), and the Bank's subsidiaries.
Use of Estimates: The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.
Contributions and Deductions: Contributions by Plan participants are recognized
as additions to net assets when the deduction is made from the participants'
wages at the end of each payroll period. In 1999, the Company amended the Plan
requiring a Company match of employee contributions for the Salary Savings
portion of the Plan ("SSP"). In 2001, the Company amended the Plan allowing
earlier participation and vesting in the Plan. Company contributions for the
Employee Stock Ownership portion of the Plan ("ESOP") are discretionary. Company
contributions are accrued in the year in which they become obligations of the
Company by authorization of its Board of Directors.
Benefits due to terminated participants and participant withdrawals are recorded
on the date distributions are made.
Investment Valuation and Income Recognition: The Plan's cash and investments are
stated at fair value. The shares of registered investment companies are valued
at quoted market prices which represent the net asset values of shares held by
the Plan at year-end. The common stock shares of Westcorp are valued at their
closing price on the New York Stock Exchange as of December 31, 2001 and 2000,
respectively. Loans to participants are valued at cost which approximates fair
value.
Purchases and sales of securities are recorded on a trade-date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
4
Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements (continued)
2. DESCRIPTION OF THE PLAN
GENERAL
The Plan is a defined contribution profit sharing plan that covers substantially
all employees and provides for retirement benefits. It is subject to the
provisions of the Employee Retirement Income Security Act of 1974 ("ERISA").
The Company and its subsidiaries make contributions to the ESOP and SSP as
determined by the Plan document, the Company's Board of Directors, and within
the guidelines of ERISA and the regulations of the Internal Revenue Service.
VESTING
Participants are immediately vested in their contributions plus actual earnings
thereon. Vesting in the Company's matching and discretionary contribution
portion of their accounts plus actual earnings thereon is based on years of
service. The participants vest as follows:
Vested Interest
------------------------
Years of Service ESOP SSP
-------------------- ------------------------
Less than 1 0% 0%
1 20% 30%
2 40% 60%
3 60% 100%
4 80%
5 or more 100%
A participant is 100% vested after five years of service for the ESOP and three
years of service for the SSP, or upon attainment of age 65 or in the event of a
participant's death or total disability while still an employee of the Company.
Forfeitures are used to reduce the Company's matching contributions. For the
year ended December 31, 2001, forfeitures of $2,303,836 were used to offset the
Company's matching contributions for the SSP portion of the Plan. The amount of
forfeitures remaining at December 31, 2001 and 2000 were not material.
5
Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements (continued)
2. DESCRIPTION OF THE PLAN (CONTINUED)
VESTING (CONTINUED)
It is the intent of the Company to continue the Plan; however, the Plan may be
terminated by the Company at any time. In the event the Plan terminates, the net
assets of the Plan will be fully allocated. All participants will vest 100%
immediately and will receive their credited balance as of the date of
liquidation.
Further information about the Plan agreement and the vesting and benefit
provisions is contained in the pamphlet "Westcorp Employee Stock Ownership and
Salary Savings Plan Summary Plan Document." Copies of this pamphlet are
available from the Plan Committee.
EMPLOYEE CONTRIBUTIONS
Employees may contribute up to 14% of annual earnings to the Plan through
regular payroll deductions under the 401(k) provisions of the Plan.
EMPLOYER CONTRIBUTIONS
Employer contributions under the ESOP are at the discretion of the Company's
Board of Directors. Employer contributions for the SSP are matched 100% of the
first $500 contributed by the participant to the Plan, and then 50% of
participant contributions, not to exceed 6% of participant annual compensation.
LOANS TO PARTICIPANTS
The Plan allows employees to borrow from their Plan accounts, excluding the ESOP
portion. A minimum loan amount of $500 can be borrowed once a year. The maximum
loan amount is 50% of the employee's vested Plan account balance not to exceed
$50,000. Loans are required to be repaid within five years; however, if the
purpose of the loan is to purchase a primary residence, the term may be up to 30
years. The loans bear interest at one percent plus the prime rate for the month
previous to the loan date. Each loan is secured by the participant's vested
interest remaining in the Plan.
6
Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements (continued)
2. DESCRIPTION OF THE PLAN (CONTINUED)
LOANS TO PARTICIPANTS (CONTINUED)
Repayments of loan amounts are used to reduce the outstanding principal balance
of the loan. Such principal reductions are then allocated among the eleven
investment options in the same proportion in which the individual employee's
elective contributions are allocated at the time of loan repayment.
3. BENEFITS PAYABLE
At December 31, 2001 and 2000, there were no vested benefits payable to
participants. Vested benefits payable are not reflected as a deduction from net
assets available for benefits in the Plan's financial statements, which creates
a difference from the Plan's Form 5500, "Annual Return/Report of Employee
Benefit Plan," which has recorded the vested benefits as a liability.
4. INVESTMENTS
The following investments represented 5 percent or more of the Plan's net
assets:
DECEMBER 31,
----------------------------
2001 2000
----------- -----------
Large Cap Value Fund $ 5,071,112 $ 4,931,808
Large Cap Growth Fund 4,453,191 6,868,023
Westcorp common stock 38,167,168 28,266,664
Stable Value Trust Fund 4,489,867 1,581,846
The Plan's investments (including investments bought, sold and held during the
year) appreciated (depreciated) in fair value during 2001 as follows:
Investments at fair value as determined by quoted
market prices:
Westcorp common stock $ 8,126,721
Mutual funds (4,437,378)
-----------
Net appreciation in fair value of investments $ 3,689,343
===========
7
Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements (continued)
5. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated February 1, 2002, stating that the Plan is qualified, in form, under
Section 401(a) of the Internal Revenue Code ("the Code") and, therefore, the
related trust is exempt from taxation. Once qualified, the Plan is required to
operate in conformity with the Code to maintain its qualification. The Plan
Administrator believes the Plan is being operated in compliance with the
applicable requirements of the Code and, therefore, believes that the Plan is
qualified and the related trust is tax exempt.
6. ADMINISTRATIVE COSTS
The Company agreed to voluntarily pay the Plan's administrative expenses of
approximately $180,789 and $135,000 in 2001 and 2000, respectively. The
agreement to pay the administrative costs may be canceled at any time.
7. EMPLOYER CONTRIBUTIONS
The Company's Board of Directors elected to provide a contribution for the ESOP
of $6,499,286 in 2001. In 2001, $2,303,836 was provided in matching
contributions for the SSP portion of the Plan and was funded through
forfeitures.
8. ESOP PARTICIPANT ALLOCATION
The Plan allocates contributions, investment changes and forfeitures to
participants' accounts as follows:
Contributions: Each participant is credited with one unit for each $100 of
eligible compensation plus an additional unit for each full year of
service. All contributions credited to employees are invested in the
Company's common stock.
Investment Changes: Each participant account is allocated the amount of
investment changes on a daily basis in the same proportion that the cash
or shares of each participant's account bears to the total accounts of all
participants in the same investment option at the time of the valuation.
Forfeitures: Forfeitures are allocated to participants who did not have a
break in service during the current year based on the proportion of each
participant's compensation to the total compensation of all such
participants during the year.
8
Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements (continued)
9. NONPARTICIPANT-DIRECTED INVESTMENTS
Information about the net assets and the significant components of the changes
in net assets relating to nonparticipant-directed investments are as follows:
DECEMBER 31,
----------------------------
2001 2000
----------- -----------
Net assets:
Cash and short-term investments $ 2,145,555 $ 601,125
Westcorp common stock 30,571,600 21,721,369
Government National Mortgage Association securities -- 26,195
----------- -----------
$32,717,155 $22,348,689
=========== ===========
FOR THE
YEAR ENDED
DECEMBER 31,
2001
------------
Beginning balance $ 22,348,689
Changes in net assets:
Employer contributions 6,499,286
Investment income 520,447
Net realized and unrealized appreciation in fair value 6,407,428
Benefits paid to participants (3,058,695)
------------
Total $ 32,717,155
============
10. HOLDINGS OF PARTIES-IN-INTEREST
The Plan has holdings of securities of parties-in-interest as follows:
DECEMBER 31,
----------------------------
2001 2000
----------- -----------
Westcorp common stock
(2,043,872 and 1,884,444 shares
in 2001 and 2000, respectively) $38,167,168 $28,266,664
=========== ===========
9
Supplemental Schedule
Westcorp
Employee Stock Ownership and Salary Savings Plan
Employer ID 510308535 Plan #001
Schedule H, Line 4i -- Schedule of Assets (Held at End of Year)
December 31, 2001
SHARES OR CURRENT
PAR VALUE IDENTITY OF ISSUE COST** VALUE
------------------------------------------------------------------------------------------------
MUTUAL FUNDS
215,234 Large Cap Growth Fund $ 4,453,191
31,024 Equity Fund 825,545
75,939 Balance Fund 1,969,848
120,193 International Fund 956,737
265,503 Large Cap Value Fund 5,071,112
152,855 Government Income Fund 1,401,678
58,940 Mid Cap Growth Fund 506,885
51,191 Small Cap Growth Fund 503,205
168,231 Technology Fund 827,695
------------
TOTAL MUTUAL FUNDS 16,515,896
COMMON STOCKS
2,043,872 Westcorp* $34,261,964 38,167,168
PARTICIPANT LOANS RECEIVABLE
$ 744,273 Participant loans 6.25% to 10.50% through 2031 744,273
SHORT-TERM INVESTMENTS
$4,489,867 Stable Value Trust Fund 4,489,867 4,489,867
------------
TOTAL INVESTMENTS $ 59,917,204
============
* Investment with a party-in-interest.
** Cost of nonparticipant-directed investments.
10
EXHIBIT INDEX
Exhibit
Number Description of Exhibits
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23.1 Consent of Ernst & Young LLP Independent Auditors