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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, 1999
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)
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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.
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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
June 29, 2000
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AUDITED FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULES
Westcorp Employee Stock Ownership
and Salary Savings Plan
Years ended December 31, 1999 and 1998
with Report of Independent Auditors
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Westcorp
Employee Stock Ownership and Salary Savings Plan
Audited Financial Statements
and Supplemental Schedules
Years ended December 31, 1999 and 1998
CONTENTS
Report of Independent Auditors ............................................ 1
Audited Financial Statements
Statements of Net Assets Available for Benefits ........................... 2
Statements of Changes in Net Assets Available for Benefits ................ 3
Notes to Financial Statements ............................................. 4
Supplemental Schedules
Schedule of Assets Held for Investment Purposes at End of Year ............ 13
Schedule of Reportable Transactions ....................................... 14
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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 Westcorp Employee Stock Ownership and Salary Savings Plan as of December 31,
1999 and 1998, 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. 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, 1999 and 1998, and the changes in its net assets available for
benefits for the years then ended 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 schedules of assets
held for investment purposes at end of year as of December 31, 1999, and
reportable transactions for the year then ended, are presented for purposes of
additional analysis and are not a required part of the financial statements but
are supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These supplemental schedules are the responsibility of the
Plan's management. The supplemental schedules have been subjected to the
auditing procedures applied in the audits of the financial statements and, in
our opinion, are fairly stated in all material respects in relation to the
financial statements taken as a whole.
/s/ ERNST & YOUNG LLP
June 2, 2000
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Westcorp
Employee Stock Ownership and Salary Savings Plan
Statements of Net Assets Available for Benefits
DECEMBER 31,
1999 1998
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ASSETS
Investments at fair value:
Cash and short-term investments $ 1,532,811 $ 1,314,111
Common stock 20,241,043 7,315,941
Mutual funds 12,330,330 9,926,745
Government National Mortgage Association Securities 43,307 45,467
Loans to participants 549,323 323,130
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Total investments 34,696,814 18,925,394
Dividends and interest receivable 1,124,220 138,462
Employee deferrals receivable 131,652 95,609
Employer contribution receivable 1,474,555 759,313
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Total receivables 2,730,427 993,384
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Net assets available for benefits $37,427,241 $19,918,778
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See accompanying notes.
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Westcorp
Employee Stock Ownership and Salary Savings Plan
Statements of Changes in Net Assets Available for Benefits
YEAR ENDED DECEMBER 31,
1999 1998
-------------------------------
Additions (deductions) to net assets attributed to:
Investment income:
Interest income $ 99,754 $ 37,785
Dividends 1,533,477 501,287
Net investment gains 1,238,610 730,670
Other losses -- (612,239)
Contributions:
Employer:
Cash 6,994,849 759,314
Allocated forfeitures -- 420,163
Employee 3,329,497 2,821,704
Rollover contributions 113,782 117,411
Net unrealized appreciation (depreciation)
in fair value of investments 8,005,741 (9,654,906)
Distributions and withdrawals paid to participants (3,807,247) (7,332,579)
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Net increase (decrease) 17,508,463 (12,211,390)
Net assets available for benefits at beginning of year 19,918,778 32,130,168
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Net assets available for benefits at end of year $ 37,427,241 $ 19,918,778
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See accompanying notes.
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Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements
December 31, 1999
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., Westcorp
Investments, Inc. and Western Financial Bank ("the Bank"), and the Bank's
subsidiaries.
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"). Company contributions for the Employee Stock
Ownership portion of the Plan ("ESOP") are voluntary. 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, 1999 and 1998,
respectively. The 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.
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.
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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:
Years of Service Vested Interest
---------------- ---------------
Less than 3 0%
3 20%
4 40%
5 60%
6 80%
7 or more 100%
A participant is 100% vested after seven years of service, 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 related to the ESOP are reallocated to
the ESOP accounts of any remaining participants. Forfeitures related to the SSP
are used to reduce the Company's matching contributions. The amount of
forfeitures was not material for the years ended December 31, 1999 and 1998.
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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 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 10% 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 the
participant contributions, not to exceed 6% of participant annual compensation.
INVESTMENT OPTIONS
Plan participants have eight investment options. A participant may invest in any
combination of the following mutual fund options offered by American Funds
and/or Westcorp common stock:
- - The Cash Management Trust of America - Funds are invested in shares of a
registered investment company that primarily invests in various money
market instruments.
- - U.S. Government Securities Fund - Funds are invested in shares of a
registered investment company that primarily invests in securities on
which the U.S. government guarantees the payment of principal and
interest.
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Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements (continued)
2. DESCRIPTION OF THE PLAN (CONTINUED)
INVESTMENT OPTIONS (CONTINUED)
- - The Income Fund of America - Funds are invested in shares of a
registered investment company that invests in a broadly diversified
portfolio of securities including stocks and bonds.
- - The Growth Fund of America - Funds are invested in shares of a
registered investment company that invests primarily in common stocks.
- - Washington Mutual Investors Fund - Funds are invested in shares of a
registered investment company that invests primarily in common stocks.
- - Westcorp Stock - Funds are invested in common stock of Westcorp.
- - EuroPacific Growth Fund of America - Funds are invested in shares of a
registered investment company that invests in a broadly diversified
portfolio of overseas stocks and bonds.
- - PaineWebber Tactical Allocation Fund - Funds are invested in shares of a
registered investment company that invests in stocks, bonds and money
market instruments.
LOANS TO PARTICIPANTS
The Plan allows employees to borrow from their Plan Accounts. 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 shall be secured by the participant's vested interest remaining
in the Plan.
Repayments of loan amounts are used to reduce the outstanding principal balance
of the loan. Such principal reductions are then allocated among the eight
investment options in the same proportion in which the individual employee's
elective contributions are allocated at the time of loan repayment.
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Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements (continued)
3. BENEFITS PAYABLE
Vested benefits payable to participants of $193,505 and $79,081 at December 31,
1999 and 1998, respectively, 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 Plan's investments, net of investments purchased during the year, increased
in fair value by $8,005,741 during 1999, and decreased in fair value by
$9,654,906 during 1998 as follows:
INCREASE
(DECREASE) IN
FAIR VALUE FAIR VALUE AT
DURING YEAR END OF YEAR
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Year ended December 31, 1999:
Fair value as determined by quoted market price:
Westcorp common stock $ 7,499,916 $ 20,241,043*
Government National Mortgage
Association Securities (346) 43,307
Mutual funds:
Washington Mutual Investors Fund (483,371) 3,910,438
The Growth Fund of America 1,018,912 5,348,101
Others (29,370) 3,071,791
Estimated fair value -- --
Loans to participants -- 549,323
Short-term investments -- 1,532,811
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$ 8,005,741 $ 34,696,814
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Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements (continued)
4. INVESTMENTS (CONTINUED)
INCREASE
(DECREASE) IN
FAIR VALUE FAIR VALUE AT
DURING YEAR END OF YEAR
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Year ended December 31, 1998:
Fair value as determined by quoted market price:
Westcorp common stock $(10,131,273) $ 7,315,941*
Government National Mortgage
Association Securities 4,538 45,467
Mutual funds:
Washington Mutual Investors Fund 149,883 4,051,291
The Growth Fund of America 378,355 3,596,551
The Income fund of America (62,364) 1,477,519
Others 5,955 801,384
Estimated fair value -- --
Loans to participants -- 323,140
Short-term investments -- 1,314,101
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$ (9,654,906) $ 18,925,394
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*Includes nonparticipant-directed investments
5. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated August 8, 1995, 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.
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Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements (continued)
6. ADMINISTRATIVE COSTS
The Company has agreed to voluntarily pay the Plan's administrative expenses of
approximately $101,000 in 1999 and $124,000 in 1998. 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 in 1999 of
$5,517,362 for the ESOP and provided $1,477,487 in matching contributions for
the SSP portion of the Plan. All of the 1999 Company's contribution consisted of
cash. During 1998, the Company's Board of Directors elected to provide a
contribution in 1998 of $1,179,477 for the SSP. The contribution consisted of
cash of $759,314 and allocated plan forfeitures of $420,163. The contribution
expense was allocated to the Company and its subsidiaries based upon the
relative participation of the employees of the Company and its subsidiaries in
the Plan.
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 Company
Stock.
Investment Changes: Each participant account is allocated the amount of
investment changes on a monthly 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.
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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 the nonparticipant-directed investments is as follows:
DECEMBER 31,
1999 1998
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Net assets:
Cash and short-term investments $ 158,271 $ 21,512
Common stock 14,365,062 5,154,187
Government National Mortgage Association Securities 43,307 45,467
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$14,566,640 $ 5,221,166
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YEAR ENDED DECEMBER 31,
1999 1998
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Beginning balance $ 5,221,166 $ 14,497,092
Changes in net assets:
Employer contributions 5,517,362 --
Investment income (loss) 544,808 (126,994)
Net realized and unrealized appreciation in fair value 5,355,014 (6,911,007)
Benefits paid to participants (2,071,710) (2,237,925)
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Total $ 14,566,640 $ 5,221,166
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10. HOLDINGS OF PARTIES-IN-INTEREST
The Plan has holdings of securities of parties-in-interest as follows:
DECEMBER 31,
1999 1998
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Westcorp common stock
(1,395,934 and 1,054,550 shares
in 1999 and 1998, respectively) $20,241,043 $ 7,315,941
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Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements (continued)
10. HOLDINGS OF PARTIES-IN-INTEREST (CONTINUED)
In 1999, the Plan was amended to allow the Plan to borrow funds for the purchase
of Company stock. During the loan term, the shares purchased with loan proceeds
are held as collateral. The collateral is released and allocated to plan
participants in proportion to the percentage of the original loan amount which
has been repaid.
During 1999, the ESOP obtained two loans from parties-in-interest totaling
$2,500,000 to purchase Company stock. The loans bore interest at LIBOR plus
fifty basis points and were paid in full at December 31, 1999. Interest paid by
the Company during 1999 relating to these loans totaled $17,362.
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Supplemental Schedules
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Westcorp
Employee Stock Ownership and Salary Savings Plan
Employer ID 510308535
Plan #001
Schedule H, Line 4i - Schedule of Assets Held for Investment Purposes
at End of Year
December 31, 1999
DESCRIPTION OF
INVESTMENT, INCLUDING MATURITY DATE,
RATE OF INTEREST, PAR CURRENT
OR MATURITY VALUE, VALUE
IDENTITY OF ISSUER OR BORROWER OR SHARES COST OF ASSET
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*Westcorp common stock 1,395,934 shares $16,301,263 $20,241,043
American Funds consists of:
Washington Mutual Investors Fund 132,288 shares 4,226,508 3,910,438
The Growth Fund of America 183,531 shares 3,967,014 5,348,101
The Income Fund of America 103,265 shares 1,784,542 1,625,387
U.S. Government Securities Fund 52,394 shares 686,529 652,834
EuroPacific Growth Fund 15,685 shares 488,442 669,126
PaineWebber Tactical Allocation Fund 3,635 shares 123,153 124,444
Cash and Short-Term Investments consist of:
Cash 676,573 676,573
The Cash Management Trust of America 856,238 shares 856,238 856,238
Government National GNMA Pool #168962
Mortgage Association Single Family Pool at
11% pass through
certificate maturing
July 15, 2016 39,295 43,307
*Loans to participants -- 549,323
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$34,696,814
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*Investment of a party-in-interest
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Westcorp
Employee Stock Ownership and Salary Savings Plan
Employer ID 510308535
Plan #001
Schedule H, Line 4j - Schedule of Reportable Transactions
Year ended December 31, 1999
IDENTITY OF PURCHASE SELLING COST OF
PARTY INVOLVED DESCRIPTION OF ASSETS PRICE PRICE ASSET
- ---------------------------------------------------------------------------------------------------------------
Category (iii) - series transactions in excess of 5% of plan assets
California Bank & Trust Westcorp Inc. Common Stock $ 5,544,236 $ - $ 5,544,236
There were no category (i), (ii) or (iv) reportable transactions during the year
ended December 31, 1999
CURRENT
VALUE OF
ASSET ON NET
IDENTITY OF TRANSACTION GAIN
PARTY INVOLVED DESCRIPTION OF ASSETS DATE (LOSS)
- ----------------------------------------------------------------------------------------------
Category (iii) - series transactions in excess of 5% of plan assets
California Bank & Trust Westcorp Inc. Common Stock $ 5,544,236 $ -
There were no category (i), (ii) or (iv) reportable transactions during the year
ended December 31, 1999
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