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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 14, 1999
BANKBOSTON CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 1-6522 04-2471221
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
100 Federal Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 434-2200
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Item 5. Other Events.
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As previously reported in its Current Report on Form 8-K dated March 14,
1999, BankBoston Corporation (the Corporation) has entered into an agreement and
plan of merger with Fleet Financial Group, Inc. (Fleet).
The Corporation's Current Report on Form 8-K dated April 2, 1999 (the Current
Report) included as exhibits thereto and incorporated by reference therein,
certain pro forma condensed combined financial information for the Corporation
and Fleet, and certain historical consolidated financial information for Fleet.
In order to update the information in the Current Report, attached hereto as
exhibits and incorporated by reference herein are (i) pro forma condensed
combined financial information for the Corporation and Fleet for the quarters
ended March 31, 1999 and 1998; and (ii) Fleet historical consolidated financial
information for the quarter ended March 31, 1999.
Item 7. Financial Statements and Exhibits.
- -------------------------------------------
(c) Exhibits.
99(a) Pro Forma Condensed Combined Balance Sheet for the Corporation and Fleet
at March 31, 1999; and Pro Forma Condensed Combined Statements of Income
for the Corporation and Fleet for the three months ended March 31, 1999
and 1998 (and Notes to Pro Forma Condensed Combined Financial Statements).
99(b) Fleet Consolidated Balance Sheets at March 31, 1999 and December 31, 1998,
and Fleet Consolidated Statements of Income, Changes in Stockholders'
Equity and Cash Flows for the three months ended March 31, 1999 and 1998
(and Notes to Consolidated Financial Statements), incorporated herein by
reference to Part 1, Item 1 of the Fleet Quarterly Report on Form 10-Q for
the quarter ended March 31, 1999 (File No. 1-6366).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BANKBOSTON CORPORATION
Dated: May 14, 1999 /s/ Robert T. Jefferson
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Robert T. Jefferson
Comptroller
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EXHIBIT 99(a)
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined balance sheet as of
March 31, 1999 and the unaudited pro forma condensed combined statements of
income for the three months ended March 31, 1999 and 1998 give effect to the
pending merger (the "merger") of BankBoston Corporation ("BankBoston") and Fleet
Financial Group, Inc. ("Fleet"), accounted for as a pooling of interests. The
merger, anticipated to be consummated in the fourth quarter of 1999 if not
earlier, is subject to shareholder and regulatory approval.
The unaudited pro forma condensed combined financial information is based
on the historical consolidated financial statements of BankBoston and Fleet
under the assumptions and adjustments set forth in the accompanying notes to the
unaudited pro forma condensed combined financial statements, and gives effect to
the merger as if the merger had been consummated at the beginning of the
earliest period presented. The unaudited pro forma condensed combined financial
statements do not give effect to the anticipated cost savings in connection with
the merger or the effects of any divestitures required by regulators.
The unaudited pro forma condensed combined financial statements should be
read in conjunction with the consolidated historical financial statements of
BankBoston and Fleet, including the respective notes to those statements. The
pro forma information is not necessarily indicative of the combined financial
position or the results of operations in the future or of the combined financial
position or the results of operations which would have been realized had the
merger been consummated during the periods or as of the dates for which the pro
forma information is presented.
Pro forma per share amounts for the combined BankBoston and Fleet entity
are based on the exchange ratio of 1.1844 shares of Fleet common stock, par
value $.01 per share, for each share of BankBoston common stock, par value $1.00
per share.
1
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BANKBOSTON CORPORATION AND FLEET FINANCIAL GROUP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of March 31, 1999
<TABLE>
<CAPTION>
Pro Forma Pro Forma
(Dollars in millions) BankBoston Fleet Adjustments Combined
---------- ----- ----------- --------
<S> <C> <C> <C> <C>
ASSETS:
Cash, due from banks and interest-bearing deposits $ 4,108 $ 4,857 $ - $ 8,965
Federal funds sold and securities purchased
under agreements to resell 3,655 5 - 3,660
Securities 13,882 11,059 - 24,941
Trading assets 4,213 670 - 4,883
Loans and leases 42,775 73,683 - 116,458
Reserve for credit losses (758) (1,724) - (2,482)
Due from brokers/dealers 101 2,726 - 2,827
Mortgages held for resale - 2,155 - 2,155
Premises and equipment 1,291 1,233 - 2,524
Mortgage servicing rights - 2,098 - 2,098
Intangible assets 793 3,423 - 4,216
Other assets 5,648 5,981 - 11,629
-------- --------- ---------- ---------
Total assets $ 75,708 $ 106,166 $ - $ 181,874
======== ========= ========= =========
LIABILITIES and STOCKHOLDERS' EQUITY:
Deposits:
Domestic:
Noninterest-bearing $ 6,298 $ 16,636 $ - $ 22,934
Interest-bearing 27,724 47,712 - 75,436
Overseas:
Noninterest-bearing 1,534 - - 1,534
Interest-bearing 12,912 3,285 - 16,197
-------- --------- ---------- ---------
Total deposits 48,468 67,633 - 116,101
-------- --------- ---------- ---------
Federal funds purchased and securities sold
under agreements to repurchase 6,181 3,027 - 9,208
Funds borrowed 7,697 3,001 - 10,698
Due to brokers/dealers 218 3,823 - 4,041
Notes payable 5,611 15,586 - 21,197
Accrued expenses and other liabilities 2,570 3,484 650 (4b) 6,704
-------- --------- ---------- ---------
Total liabilities 70,745 96,554 650 167,949
-------- --------- ---------- ---------
Stockholders' equity:
Preferred stock - 691 - 691
Common stock 307 6 (304)(4a) 9
Common surplus 1,106 3,291 (127)(4a) 4,270
Retained earnings 3,982 5,602 (650)(4b) 8,934
Accumulated other comprehensive income (37) 58 - 21
Treasury stock, at cost (395) (36) 431 (4a) -
-------- --------- ---------- ---------
Total stockholders' equity 4,963 9,612 (650) 13,925
-------- --------- ---------- ---------
Total liabilities and stockholders' equity $ 75,708 $ 106,166 $ - $ 181,874
======== ========= ========== =========
</TABLE>
See Notes To The Unaudited Pro Forma Condensed Combined Financial Statements
2
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BANKBOSTON CORPORATION AND FLEET FINANCIAL GROUP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
For the Three Months Ended March 31, 1999
<TABLE>
<CAPTION>
Pro Forma Pro Forma
(Dollars in millions, except per share amounts) BankBoston Fleet Adjustments Combined
---------- ----- ----------- --------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 1,034 $ 1,559 $ - $ 2,593
Interest on securities and trading assets 229 173 - 402
Other 109 46 - 155
-------- -------- --------- --------
Total interest income 1,372 1,778 - 3,150
-------- -------- --------- --------
Interest expense:
Deposits 473 424 - 897
Funds borrowed 180 80 - 260
Notes payable 84 201 - 285
Other - 39 - 39
-------- -------- --------- --------
Total interest expense 737 744 - 1,481
-------- -------- --------- --------
Net interest income 635 1,034 - 1,669
-------- -------- --------- --------
Provision for credit losses 70 149 - 219
-------- -------- --------- --------
Net interest income after provision for credit losses 565 885 - 1,450
-------- -------- --------- --------
Noninterest income:
Investment services revenue 134 248 - 382
Banking fees and commissions 154 193 - 347
Credit card revenue 21 141 - 162
Venture capital revenue 34 41 - 75
Other 252 336 - 588
-------- -------- --------- --------
Total noninterest income 595 959 - 1,554
-------- -------- --------- --------
Noninterest expense:
Employee compensation and benefits 473 542 - 1,015
Occupancy and equipment 109 162 - 271
Intangible asset amortization 15 71 - 86
Other 209 350 - 559
-------- -------- --------- --------
Total noninterest expense 806 1,125 - 1,931
-------- -------- --------- --------
Income before income taxes 354 719 - 1,073
Applicable income taxes 131 281 - 412
-------- -------- --------- --------
Net income $ 223 $ 438 $ - $ 661
======== ======== ========= ========
Net income applicable to common shares $ 223 $ 422 $ - $ 645
======== ======== ========= ========
Weighted average common shares outstanding
(in thousands):
Basic 295,935 568,546 - 919,051 (4c)
Diluted 298,477 588,572 - 942,088 (4c)
Per Common Share:
Basic $ 0.75 $ 0.74 $ - $ 0.70 (4c)
Diluted 0.75 0.72 - 0.68 (4c)
</TABLE>
See Notes To The Unaudited Pro Forma Condensed Combined Financial Statements
3
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BANKBOSTON CORPORATION AND FLEET FINANCIAL GROUP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
For the Three Months Ended March 31, 1998
<TABLE>
<CAPTION>
Pro Forma Pro Forma
(Dollars in millions, except per share amounts) BankBoston Fleet Adjustments Combined
---------- ----- ----------- --------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 1,012 $ 1,378 $ - $ 2,390
Interest on securities and trading assets 208 162 - 370
Other 117 54 - 171
-------- -------- --------- --------
Total interest income 1,337 1,594 - 2,931
-------- -------- --------- --------
Interest expense:
Deposits 462 438 - 900
Funds borrowed 207 84 - 291
Notes payable 65 89 - 154
Other - 54 - 54
-------- -------- --------- --------
Total interest expense 734 665 - 1,399
-------- -------- --------- --------
Net interest income 603 929 - 1,532
-------- -------- --------- --------
Provision for credit losses 140 92 - 232
-------- -------- --------- --------
Net interest income after provision for credit losses 463 837 - 1,300
-------- -------- --------- --------
Noninterest income:
Investment services revenue 82 201 - 283
Banking fees and commissions 131 176 - 307
Credit card revenue 10 56 - 66
Venture capital revenue 52 30 - 82
Securities gains 25 51 - 76
Gain on sale of business 165 - - 165
Other 124 181 - 305
-------- -------- --------- --------
Total noninterest income 589 695 - 1,284
-------- -------- --------- --------
Noninterest expense:
Employee compensation and benefits 354 445 - 799
Occupancy and equipment 94 154 - 248
Intangible asset amortization 10 51 - 61
Merger-related charges - 73 - 73
Other 203 274 - 477
-------- -------- --------- --------
Total noninterest expense 661 997 - 1,658
-------- -------- --------- --------
Income before income taxes 391 535 - 926
Applicable income taxes 153 212 - 365
-------- -------- --------- --------
Net income $ 238 $ 323 $ - $ 561
======== ======== ========= ========
Net income applicable to common shares $ 234 $ 311 $ - $ 545
======== ======== ========= ========
Weighted average common shares outstanding
(in thousands):
Basic 292,542 567,778 - 914,265 (4c)
Diluted 296,840 587,184 - 938,761 (4c)
Per Common Share:
Basic $ 0.80 $ 0.55 $ - $ 0.60 (4c)
Diluted 0.79 0.53 - 0.58 (4c)
</TABLE>
See Notes To The Unaudited Pro Forma Condensed Combined Financial Statements
4
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NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The pro forma information presented is not necessarily indicative of the
results of operations or the combined financial position that would have
resulted had the merger been consummated at the beginning of the periods
indicated, nor is it necessarily indicative of the results of operations in
future periods or the future financial position of the combined company. It is
anticipated that the merger will be consummated in the fourth quarter of 1999,
if not earlier.
Under generally accepted accounting principles, the transaction will be
accounted for as a pooling of interests and, as such, the assets and liabilities
of Fleet will be combined with those of BankBoston at book value. In addition,
the statements of income of Fleet will be combined with the statements of income
of BankBoston as of the earliest period presented. The unaudited pro forma
condensed combined statements of income give effect to the merger as if the
merger occurred at the beginning of the earliest period presented. The unaudited
pro forma condensed combined balance sheet assumes the merger was consummated on
March 31, 1999. Certain reclassifications have been included in the unaudited
pro forma condensed combined balance sheet and unaudited pro forma condensed
combined statements of income to conform presentations.
BankBoston and Fleet anticipate that, in order to obtain regulatory
approval for the merger, the companies will be required to divest approximately
$13 billion of deposits, primarily in the Massachusetts, Connecticut and Rhode
Island markets. No adjustment has been included, however, in the unaudited pro
forma condensed combined financial statements for the anticipated divestitures.
The reduction in net income related to such divestitures is estimated to be $160
million post-tax.
Note 2. Accounting Policies and Financial Statement Classifications
The accounting policies of both companies are in the process of being
reviewed for consistency. As a result of this review, certain conforming
accounting adjustments may be necessary. The nature and extent of such
adjustments have not been determined but are not expected to be significant.
Transactions between BankBoston and Fleet that are not material in relation to
the pro forma financial information have not been eliminated from the pro forma
combined amounts.
Note 3. Merger- and Restructuring-Related Charges
A liability of $1 billion (pre-tax) has been recorded in the unaudited pro
forma condensed combined balance sheet to reflect BankBoston's and Fleet's best
estimate of merger- and restructuring-related charges in connection with the
merger. This liability resulted in a $650 million post-tax charge to retained
earnings in the unaudited pro forma condensed combined balance sheet. The
following table provides detail of the estimated charges by type, post-tax:
<TABLE>
<CAPTION>
Estimated Costs
(Post-Tax)
Type of Cost (Dollars in millions)
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<S> <C>
Personnel $300
Technology and operations 150
Facilities 75
Branches 25
Transaction costs and other 100
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Total $650
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</TABLE>
5
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NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(continued)
Personnel-related costs consist primarily of charges related to employee
severance, termination of certain employee benefits plans and employee
assistance costs for separated employees. Technology and operations costs
include accelerated depreciation in excess of normal scheduled depreciation and
certain liabilities that will be incurred as a result of the elimination of
duplicate systems. Facilities charges consist of lease termination costs and
other facilities-related exit costs, as well as accelerated depreciation in
excess of normal depreciation, resulting from consolidation of duplicate
headquarters and operation facilities. Branch-related costs are primarily
related to the cost of exiting branches anticipated to be closed, including
lease terminations and equipment write-offs. The effect of the proposed charge
has been reflected in the unaudited pro forma condensed combined balance sheet
as of March 31, 1999. However, since the proposed charge is nonrecurring, it has
not been reflected in the unaudited pro forma condensed combined statements of
income. In addition, it is estimated that $60 million (post-tax) in other
expenses related to the merger will be recognized in future periods as they are
incurred. These charges have not been reflected in the unaudited pro forma
condensed combined balance sheet as of March 31, 1999.
Note 4. Pro Forma Adjustments
(a) Pro forma adjustments to common stock, treasury stock and common
surplus at March 31, 1999, reflect the merger accounted for as a pooling of
interests, through: (1) the exchange of 351.3 million shares of Fleet common
stock (using the exchange ratio of 1.1844) for the 296.6 million outstanding
shares of BankBoston common stock at March 31, 1999, (2) the reclassification
adjustment to common stock to reflect the $.01 par value of Fleet common stock,
and (3) an adjustment for $431 million to reflect the retirement of BankBoston
treasury stock and the reissuance of Fleet treasury stock.
(b) Pro forma adjustments to accrued expenses and other liabilities and
retained earnings reflect the $1 billion merger- and restructuring-related
charge and a $350 million reduction in the deferred tax liability for the
anticipated tax benefit of such charge. For additional information on the
merger- and restructuring-related charges see Note 3.
(c) The pro forma combined weighted average common shares outstanding for
the three months ended March 31, 1999 and 1998 reflect the converted BankBoston
weighted average common shares outstanding plus Fleet weighted average common
shares outstanding. Each share of BankBoston common stock was converted into
1.1844 shares of Fleet common stock.
Note 5. Other Securities and Exchange Commission Filings
In connection with its proposed merger with BankBoston, Fleet will file a
Registration Statement on Form S-4 with the Securities and Exchange Commission
(the "Commission") registering Fleet common stock to be issued in connection
therewith. This Registration Statement, which may be subject to review and
comment by the Staff of the Commission, includes pro forma financial
information for BankBoston and Fleet. Such pro forma financial information may
differ from the pro forma financial information included herein.
6
