United States
Securities and Exchange Commission
Washington, DC 20549
Form 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
Commission file number 0-13818
POPULAR, INC. U.S.A. PROFIT SHARING/401(K) PLAN
(Full title of the Plan and address of the Plan, if
different from that of the issuer named below)
POPULAR, INC.
209 MUNOZ RIVERA AVENUE
HATO REY, PUERTO RICO 00918
(Name of issuer of the securities held pursuant to the
plan and the address of principal executive office)
POPULAR, INC. U.S.A. PROFIT SHARING/401(K) PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
AT DECEMBER 31, 2001 AND 2000
Page
----
Financial Statements:
Report of Independent Accountants.........................................................1
Statement of Net Assets Available for
Benefits as of December 31, 2001 and 2000.............................................2
Statement of Changes in Net Assets Available
For Benefits for the year ended December 31, 2001.......................................3
Statement of Changes in Net Assets Available
For Benefits for the year ended December 31, 2001.......................................4
Notes to Financial Statements.............................................................5-10
Supplemental Schedule:
Schedule 1 - Schedule of Assets (Held at End of the Year)
At December 31, 2001....................................................................11
* Other schedules required by Section 2520.103-10 of the Department of
Labor's Rules and Regulations for Reporting and Disclosure under ERISA
have been omitted because they are not applicable
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Administrator of
Popular, Inc. U.S.A. Profit Sharing/401(k) Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of Popular, Inc. U.S.A. Profit Sharing/401(k) Plan (the "Plan") at December 31,
2001 and 2000 and the changes in net assets available for benefits for the year
ended December 31, 2001 in conformity with accounting principles generally
accepted in the United States of America. 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 of these statements in accordance with auditing standards generally
accepted in the United States of America, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes 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 financial statements and, in our opinion, is fairly stated
in all material respects in relation to the basic financial statements taken as
a whole.
June 27, 2002
1
POPULAR, INC. U.S.A. PROFIT SHARING/401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31,
------------------------------
2001 2000
------------ -----------
ASSETS
Investments at fair value (see Note 5) $31,130,282 $26,483,490
Cash 100 --
Receivables
Employer's contributions 828,900 1,095,902
Participants' contributions 15,965 121,363
Interest and other receivables 10,026 22,834
Due from broker for securities sold -- 27,139
----------- -----------
TOTAL RECEIVABLES 854,891 1,267,238
----------- -----------
TOTAL ASSETS 31,985,273 27,750,728
=========== ===========
LIABILITIES
Refundable contributions $ 276,511 $ 349,780
Payable to Trustee -- 2,082
Distributions payable 31,186 28,823
----------- -----------
TOTAL LIABILITIES 307,697 380,685
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $31,677,576 $27,370,043
=========== ===========
The accompanying notes are an integral part of these financial statements.
2
POPULAR, INC. U.S.A. PROFIT SHARING/401(K) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2001
Additions to net assets attributed to:
Investment income
Net appreciation in fair value of investments (See Note 5) $ 1,198,924
Dividends 209,698
Interest income, participants' loans 78,840
Interest income, investments 71,013
-----------
1,558,475
-----------
Contributions
Participants 3,733,562
Rollovers from external sources 462,847
Employer 2,189,658
-----------
6,386,067
-----------
TOTAL ADDITIONS 7,944,542
-----------
Deductions
Deductions from net assets attributed to:
Benefits paid to participants (loss) 3,349,372
Refunded contributions 282,187
Administrative expenses 5,450
-----------
3,637,009
-----------
Increase in net assets 4,307,533
Net assets available for benefits
Beginning of year 27,370,043
-----------
End of year $31,677,576
===========
The accompanying notes are an integral part of these financial statements.
3
POPULAR, INC. U.S.A PROFIT SHARING/401(K) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2001
--------------------------------------------------------------------------------
1. DESCRIPTION OF THE PLAN
The following brief description of the Popular, Inc. U.S.A. Profit
Sharing/401(k) Plan (the "Plan") is provided for general information.
Popular, Inc. is the sponsor of the Plan. Participants should refer to
the Plan document for more complete information.
GENERAL
Pioneer Bank & Trust Company Profit Sharing Plan (the "Pioneer Plan")
was established on January 1, 1972, as a qualified defined contribution
plan. The Pioneer Plan was amended and restated, effective January 1,
1976 and again restated, effective July 1, 1982, to comply with the
requirements of the Employee Retirement Income Security Act of 1974
(ERISA). On July 1, 1989, the Pioneer Plan was amended to include a
cash or deferred arrangement under Section 401(k) of the Internal
Revenue Code ("401(k)"). The Pioneer Plan sponsor was Banco Popular,
Illinois, a wholly-owned subsidiary of Popular, Inc.
On March 1, 1997, the Pioneer Plan was restated and converted into a
defined contribution participant-directed plan under the name of
BanPonce U.S.A. Profit Sharing/401(k) Plan. On October 14, 1998,
certain provisions related to rollover contributions and distributions
of the Plan were amended.
During 1998 the employees of Banco Popular, Illinois, Banco Popular,
California, N.A., Banco Popular, Florida, N.A., Banco Popular, Texas
N.A., Popular Leasing U.S.A., Inc. and Banco Popular, FSB participated
in the Plan.
Effective January 1, 2000, the entities participating in the Plan
merged to form a single banking entity under the name of Banco Popular
North America (the "Bank").
On January 1, 2000 employees from the Bank, Banco Popular, N.A.
(Texas), First State Bank of Southern California and Gore Bronson
Bancorp became eligible to participate in the Plan. The Plan was also
amended to allow for additional discretionary contributions to be made
to the Plan on behalf of participants who were employees of the New
York branch of Banco Popular de Puerto Rico on December 31, 1998.
On April 30, 2000, the BanPonce U.S.A. Profit Sharing/401(k) Plan
adopted the name of Popular, Inc. U.S.A. Profit Sharing/401(k) Plan.
During 2000, the Plan was amended to allow for a merger of assets from
Citizens National Bank Profit Sharing Savings Plan with total assets of
$607,998, Banco Popular de Puerto Rico Employee Stock Plan with total
assets of $5,445,596 and the Gore Bronson Bancorp Profit Sharing Plan
and Trust with total assets of $509,895.
The accompanying notes are an integral part of these financial statements.
4
POPULAR, INC. U.S.A. PROFIT SHARING/401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
The Plan is administered by a committee (the "Plan Committee")
appointed by the Board of Directors of Popular, Inc. A trust was
established to hold and invest all of the assets of the Plan. The
trustee for the Plan is the Trust Department of Banco Popular North
America (Illinois). The Plan is subject to the provisions of ERISA.
Effective January 1, 2001, the Plan was amended to allow participation
by employees of Banco Popular de Puerto Rico (BPPR) that are employed
in the Virgin Islands (VI) or British Virgin Islands (BVI). These
employees can contribute from 1% to 10% of eligible pre-tax annual
compensation (post tax for BVI employees) up to IRS limits. The Bank
contributes 50 cents for each dollar the employee contributes up to 2%
of their eligible compensation that has been invested in Popular Inc.
Common Stock subject to compliance with certain requirements as
outlined in the Plan. Assets from the prior plan were transferred in
2001.
Effective August 1, 2001, Article 9 of the Plan was amended by adding
Section 9.4 that allows a participant who has attained age 59 1/2 to
elect to receive 100% of the value of his before-tax deposit account
and his after-tax deposit account and the vested portion of Matching
Employer Contributions.
On February 19, 2002, a restated plan was submitted to the IRS for a
new determination letter. The restated plan incorporates prior
amendments. In addition the plan extends benefits to employees of the
GM Group in the United States as of July 1, 2001 and Popular Insurance
Inc. employees in the United States as of September 25, 2001.
ELIGIBILITY AND VESTING
Prior to September 1, 2000, employees were automatically enrolled in
the Plan upon the first day of the month coinciding with or next
following the date they became an employee. Beginning September 1,
2000, employees are automatically enrolled into the Plan upon the first
day of the month following 30 days of service. Participants are
immediately vested in their voluntary contributions and earnings
thereon. Vesting in the Bank's matching and discretionary contribution
portion of their account plan plus actual earnings thereon is based on
years of credited service. A participant begins to vest in the Plan
according to the following table:
YEARS OF CREDIT SERVICE VESTING PERCENTAGE
----------------------- ------------------
Less than 2 0%
2 25
3 50
4 75
5 or more 100
CONTRIBUTIONS
Employees may contribute from 1% to 10% of eligible pre-tax annual
compensation up to a maximum of $10,500 based on IRS limitations.
Participants may also contribute amounts representing distributions
from other qualified defined benefit or contribution plans.
5
POPULAR, INC. U.S.A. PROFIT SHARING/401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
The Bank contributes 50 cents for each pre-tax $1 contributed by an
employee. Additionally, the Bank contributes 50 cents for each pre-tax
$1 contributed by an employee that has been invested in the Popular,
Inc. Common Stock Fund, subject to compliance with certain requirements
defined in the Plan agreement. Total contributions from the Bank will
not exceed 6% of the employee's pre-tax compensation. The Bank will
also make a profit sharing contribution in an amount determined by the
Board of Directors of the Bank. The Bank's profit sharing and 401(k)
matching contribution is limited to the total amount which the Bank can
deduct for federal income tax purposes.
PARTICIPANT ACCOUNTS
As of the last day of each quarter, net earnings or losses are
allocated among eligible participants in proportion to their account
balances relative to the total of all such account balances as of the
previous valuation date, adjusted for distributions and employee
contributions made during the quarter. As of the last day of the Plan
year, the Bank's profit sharing contribution is allocated to
participant accounts based upon the participants' eligible
compensation, as defined and subject to compliance with certain
requirements included in the Plan agreement.
As of the last day of the plan year, the Bank's additional matching
contribution is allocated based on each employee's contribution, as
described above. The Bank's contributions plus the employee's after-tax
and pre-tax contributions are limited to the lesser of 25% of the
employee's eligible compensation or a maximum amount set annually by
federal authorities.
INVESTMENT OPTIONS
Upon enrollment in the Plan, a participant may direct his/her
investments and reinvestments, other than his/her Bonus Matching
Contribution, in any of nine investment options.
M&I STABLE PRINCIPAL FUND: This fund's objective is to maintain safety
of principal while generating a level of current income generally
exceeding that of a money market fund. This fund primarily invests in
traditional and synthetic investments contracts.
PIMCO TOTAL RETURN FUND: This fund invests mainly in fixed income
securities, seeking maximum return, consistent with preservation of
capital and prudent investment management.
VANGUARD WELLINGTON INCOME FUND: This fund seeks to conserve capital
and to provide moderate long-term growth in capital and income by
investing in common stocks and debt securities.
DAVIS NEW YORK VENTURE FUND: This fund's investment objective is growth
of capital. The fund ordinarily invests in common stocks.
T. ROWE PRICE MID-CAP GROWTH FUND: This fund seeks long-term capital
appreciation through investments in medium-sized growth companies.
FIDELITY GROWTH & INCOME FUND: This fund seeks long-term growth,
current income and long-term growth of income consistent with
reasonable investment risk by investing in common stocks and corporate
bonds.
6
POPULAR, INC. U.S.A. PROFIT SHARING/401(K) PLAN
NOTES TO FINANCIAL STATEMENTS
VANGUARD 500 INDEX FUND: This fund seeks investment results that
correspond to the price and yield performance of the S&P 500 Index.
IVY INTERNATIONAL FUND: This fund invests in foreign stocks, seeking
long-term capital growth.
POPULAR INC. COMMON STOCK FUND: This fund is primarily invested in
Popular Inc. Common Stock and cash.
PARTICIPANT LOANS
Participants may borrow against their fund accounts a minimum of $500
up to a maximum of the lesser of $50,000 or 50% of the vested portion
of the participant's equity in the Plan, and limited in amount by
specific regulations. Loans are charged a reasonable interest rate,
which is determined by the Plan Committee and which meets all
regulatory requirements.
DISTRIBUTIONS
Distributions may occur for termination, retirement, disability, or
death. The Plan provides that benefits be distributed in one of the
following manners as selected by the participant or beneficiary: (a)
payment in one single sum; or (b) payment in substantially equal
installments determined by the participant or beneficiary.
PLAN TERMINATION
Although it has not expressed any intent to do so, the sponsor may
terminate the Plan for any reason at any time, in which event there
shall be no employer duty to make contributions. In the event of
termination, all participants become fully vested and have a
nonforfeitable right to their full account balance.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of
America. A description of the more significant accounting policies
follows.
VALUATION OF INVESTMENTS
Plan investments are stated at fair value, with the exception of M&I
Stable Principal Fund that is stated at contract value, which
approximates fair value. Shares of registered investment companies are
valued at quoted market prices which represent the net asset value of
shares held by the Plan at year-end. Popular Inc. Common Stock is
valued at its quoted market price.
The registered investment companies retain and reinvest all dividends.
Such undistributed income is included in the statement of changes in
net assets available for benefits and is recorded as an increase in the
cost basis of fund units held at year end in the statement of net
assets available for benefits.
Temporary investments are stated at cost, which approximates fair
value.
7
POPULAR, INC. U.S.A. PROFIT SHARING/401(K) PLAN
NOTES TO FINANCIAL STATEMENTS
Purchases and sales of securities are recorded on a trade-date basis.
INVESTMENT INCOME
Net gain on investments is a combination of net realized gains (losses)
and the change in unrealized appreciation (depreciation) from the
previous year-end. Dividends are recorded on the ex-dividend date.
Interest income on temporary investments is recorded on the accrual
basis.
ADMINISTRATIVE EXPENSES
Loan origination fees directly attributable to the Plan are paid by the
Plan. Legal and other administrative expenses are paid by the Bank and,
accordingly, have not been reflected in the Plan's financial
statements.
PAYMENT OF BENEFITS
Benefits are recorded when paid.
FORFEITED ACCOUNTS
Forfeited nonvested accounts totaled $308,284 and $346,365 at December
31, 2001 and 2000, respectively. These accounts were used to reduce
Employer contributions.
REFUNDABLE CONTRIBUTIONS
Refundable contributions totaled $282,187 and $349,780 at December 31,
2001 and 2000, respectively. These excess contributions arise as a
result from failing non-discrimination tests in accordance with the
Internal Revenue Service Regulations.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Plan administrator to make
estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the
reported amounts of additions and deductions to net assets during the
reporting period. Actual results could differ from these estimates.
RISKS AND UNCERTAINTIES
The Plan provides for various investment options in any combination of
stocks, fixed income securities, mutual funds and other investment
securities. Investment securities are exposed to various risks, such as
interest rate, market and credit risk. Due to the level of risk
associated with certain investment securities, it is at least
reasonably possible that changes in the value of investment securities
will occur in the near term and that such changes could materially
affect participant account balances and the amounts reported in the
statement of net assets available for benefits.
1. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits
as presented in the financial statements to the Form 5500:
8
POPULAR, INC. U.S.A. PROFIT SHARING/401(K) PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,
-------------------------------
2001 2000
----------- ------------
Net assets available for benefits per the financial statements $31,677,576 $ 27,370,043
Amounts allocated to withdrawing participants -- (56,348)
----------- ------------
Net assets available for benefits per the Form 5500 $31,677,576 (27,313,695)
=========== ============
YEAR ENDED
DECEMBER 31, 2001
-----------------
Benefits paid to participants per the financial statement $ 3,349,372
Add: Amounts allocated to withdrawing participants, December 31, 2001 --
Less: Amounts allocated to withdrawing participants, December 31, 2000 (56,348)
-----------
Benefits paid to participants per the Form 5500 $ 3,293,024
===========
Amounts allocated to withdrawing participants are recorded on the Form
5500 for benefit claims that have been processed and approved for
payment prior to December 31, 2001 but not yet paid as of that date.
1. INCOME TAXES
The Popular, Inc. U.S.A. Profit Sharing/401(k) Plan received a
favorable determination letter from the Internal Revenue Service, dated
April 7, 1999, indicating that it qualified under Section 401(a) of the
Internal Revenue Code (IRC). The Plan has been restated since receiving
the determination letter. However, the Plan administrator and the
Plan's tax counsel believe that the Plan is designed and is currently
being operated in compliance with the applicable provisions of the IRC.
A request for a new determination letter was submitted to the IRS on
February 19, 2002.
1. INVESTMENTS HELD
Investments held by the Plan are summarized below. Those investments
that represent 5 percent or more of the Plan's net assets at the end of
the year are noted with an asterisk (*).
9
POPULAR, INC. U.S.A. PROFIT SHARING/401(K) PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 DECEMBER 31, 2000
SHARES/UNITS FAIR VALUE SHARES/UNITS FAIR VALUE
Enhanced Cash Investment
Fund - - 2,465 $ 2,465
Shares of registered
investment companies
M&I Stable Principal Fund 1,327,272 1,327,272 1,546,726 1,546,726 *
PIMCO Total Return Fund 101,683 1,063,602 88,940 924,081
Vanguard Wellington
Income Fund 103,056 2,809,310 * 86,938 2,452,517 *
Davis New York Venture Fund 73,627 1,872,333 * 72,178 2,074,392 *
T. Rowe Price Mid-Cap
Growth Fund 49,789 1,961,685 * 44,949 1,788,519 *
Fidelity Growth & Income Fund 30,053 1,123,385 23,128 973,675
Vanguard 500 Index Fund 15,566 1,648,331 * 12,220 1,489,110 *
Ivy International Fund 22,431 464,088 23,336 611,404
Popular Inc. Common Stock
Fund 546,981 18,021,051 * 406,774 11,871,059 *
Popular Inc. Common Stock 120 3,489 78,861 2,075,070 *
------------ --------------
30,294,546 25,809,018
Participant loans 835,736 674,472
------------ --------------
TOTAL $ 31,130,282 $ 26,483,490
============ ==============
During 2001, the Plan's investments (including gain and losses on investments
bought and sold, as well as held during the year) appreciated (depreciated) in
value by $1,198,924 as follows:
Mutual funds $ (392,461)
Common Stock 1,591,385
----------
$1,198,924
==========
The M&I Stable Principal Fund is fully benefit responsive. The average yield for
the year ended December 31, 2001 was 4.25%. The crediting interest rate as of
December 31, 2001 was 4.61%. The frequency and basis for determining the
crediting interest rate resets are daily and accrual/units, respectively. There
are no valuation reserves recorded to adjust the contract amounts. There is no
minimum crediting interest rate under the terms of the contracts. There are no
limitations or guarantees on the contracts.
10
POPULAR, INC. U.S.A. PROFIT SHARING/401(K) PLAN
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
YEAR ENDED DECEMBER 31, 2001
SCHEDULE I
DESCRIPTION OF INVESTMENT
INCLUDING MATURITY DATE,
IDENTITY OF ISSUE, BORROWER, RATE OF INTEREST, COLLATERAL
LESSOR, OR SIMILAR PARTY PAR OR MATURITY VALUE COST CURRENT VALUE
--------------------------------- -------------------------------- ------------ -------------
M&I Stable Principal Fund* 1,327,272 shares 1,327,272 1,327,272
PIMCO Total Return Fund 101,683 shares 1,059,575 1,063,602
Vanguard Wellington Income Fund 103,056 shares 2,952,196 2,809,310
Davis NY Venture Fund 73,627 shares 1,778,533 1,872,333
T. Rowe Price Mid-Cap Growth Fund 47,789 shares 1,693,458 1,961,685
Fidelity Growth & Income Fund 30,053 shares 1,277,447 1,123,385
Vanguard 500 Index Fund 15,566 shares 1,909,062 1,648,331
Ivy International Fund 22,431 shares 781,294 464,088
Popular Inc. Common Stock Fund* 546,981 units 14,211,462 18,021,051
Popular Inc. Common Stock 120 shares 2,602 3,489
Participant Loans* Interest rates range between
7.00% and 11.50% 835,736 835,736
----------- -----------
Total $27,828,637 $31,130,282
=========== ===========
* Party in interest to the Plan.
The accompanying notes are an integral part of these financial statements.
11
Signature
Pursuant to the requirement of the Securities Exchange Act of 1934, the
persons who administer the employee benefit plan have duly caused this annual
report to be signed on its behalf by the undersigned hereunto duly authorized.
POPULAR, INC. U.S.A. PROFIT SHARING/401(K) PLAN
(Name of Plan)
By: S/ Tere Loubriel
--------------------------
Tere Loubriel
Authorized Representative
By: S/ Jorge A. Junquera
--------------------------
Jorge A. Junquera
Authorized Representative
in the United States
Dated: June 27, 2002
12