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 25, 1999
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FIRST UNION CORPORATION
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(Exact name of registrant as specified in its charter)
North Carolina 1-10000 56-0898180
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
One First Union Center
Charlotte, North Carolina 28288-0013
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (704)374-6565
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(Former name or former address, if changed since last report.)
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Item 5. Other Events.
On May 25, 1999, First Union Corporation (the "Corporation") issued a
news release (the "News Release"). A copy of the News Release is being filed as
Exhibit (99) to this report. The News Release is incorporated herein by
reference.
The News Release contains, among other things, certain forward-looking
statements with respect to the goals, plans, objectives, intentions,
expectations, financial condition, results of operations, future performance and
business of the Corporation, including, without limitation, (i) statements
relating to the Corporation's goals and expectations with respect to (a)
earnings per share, (b) return on equity, (c) revenue growth, (d) expense
control, and (e) its strategic plans, and (ii) statements preceded by, followed
by or that include the words "may", "could", "would", "should", "believes",
"expects", "anticipates", "estimates", "intends", "plans" or similar
expressions. These forward-looking statements involve certain risks and
uncertainties that are subject to change based on various factors (some of which
are beyond the Corporation's control). The following factors, among others,
could cause the Corporation's financial performance to differ materially from
the goals, plans, objectives, intentions, and expectations expressed in such
forward-looking statements: (1) the strength of the United States economy in
general and the strength of the local economies in which the Corporation
conducts operations; (2) the effects of, and changes in, trade, monetary and
fiscal policies and laws, including interest rate policies of the Board of
Governors of the Federal Reserve System; (3) inflation, interest rate, market
and monetary fluctuations (including global markets and international monetary
fluctuations); (4) the timely development and acceptance of new products and
services by the Corporation and the acceptance of these products and services by
new and existing customers; (5) the willingness of customers to substitute
competitors' products and services for the Corporation's products and services
and vice versa; (6) the impact of changes in financial services' laws and
regulations (including laws concerning taxes, banking, securities and
insurance); (7) technnological changes, including the impact of the Year 2000
computer system problems; (8) changes in consumer spending and saving habits;
(9) the impact of the EVEREN Capital Corporation and other acquisitions on the
Corporation, including the success of the Corporation in fully realizing or
realizing within the expected time frame expected cost savings and/or revenue
enhancements; (10) the growth and profitability of the Corporation's noninterest
or fee income being less than expected; (11) unanticipated regulatory or
judicial proceedings; (12) the impact of changes in accounting policies by the
Securities and Exchange Commission; and (13) the success of the Corporation at
managing the risks involved in the foregoing. Additional information with
respect to factors that may cause actual results to differ materially from those
contemplated by such forward-looking statements is included in the reports filed
by the Corporation with the Securities and Exchange Commission.
The Corporation cautions that the foregoing list of factors is not
exclusive, and neither such list nor any such forward-looking statement takes
into account the impact that any future acquisitions may have on the Corporation
and any such forward-looking statement. In addition, the Corporation does not
intend to update any forward-looking statement, whether written or oral,
relating to the matters discussed in the News Release or otherwise.
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Item 7. Financial Statements and Exhibits.
(c) Exhibits.
(99) The News Release.
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.
FIRST UNION CORPORATION
Date: May 25, 1999 By: /s/ Kent S. Hathaway
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Name: Kent S. Hathaway
Title: Senior Vice President
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EXHIBIT INDEX
Exhibit No. Description
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(99) The News Release.
FIRST UNION 1999 EARNINGS OUTLOOK REVISED TO $3.40 TO $3.50 PER SHARE
A YEAR OF TRANSITION, CONSOLIDATION AND STRATEGIC FOCUS
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Charlotte, N.C - First Union Corporation (NYSE: FTU) announced today that
following a strategic review and analysis, it expects earnings for 1999 will be
in the range of $3.3 billion to $3.4 billion, or $3.40 to $3.50 per share. The
new outlook compares with the earnings goal of approximately $4.00 per share
that the company had communicated earlier this year. For the second quarter of
1999, earnings are expected to be in the range of $770 million to $800 million,
or 80 to 83 cents per share. This outlook for the quarter and the year excludes
the previously announced non-recurring gains of 8 cents per share in the second
quarter of 1999 and 20 cents per share for the year. It also excludes
merger-related and restructuring charges.
In 1998 First Union reported earnings excluding merger-related and restructuring
charges of $3.7 billion, or $3.77 per share, which included approximately 50
cents more per share of noncore earnings than is anticipated for 1999.
"In 1999, the company's fundamental operations are strong, as evidenced by an
estimated 20 percent return on shareholders' equity. However, in 1999 we are
faced with overcoming the impact of substantial 1998 unusual, noncore earnings
items, major acquisition integration and acceleration of spending for major new
strategic initiatives as we deploy a new business model," said Edward E.
Crutchfield, First Union's chairman and CEO.
"This is an important transition year as we strategically reposition our company
for the future," he added. "We are compressing a number of initiatives and
acquisition consolidation into a short timeframe. In addition, with the
developing roles of Capital Markets and Capital Management, Future Bank and now
the expansion of the Internet channel, we are deploying a new business model
that no longer includes bank acquisitions as a fundamental part of our strategy.
"In a time of exponential change, we believe that long-range profitability and
success require investment for the future - even though 1999 earnings will be
affected," Crutchfield concluded.
The revised earnings outlook for 1999 includes annual core revenue growth of
approximately 6 to 7 percent and annual expense growth of approximately 3
percent. The resulting 20 percent return on shareholders' equity would rank
among the best of the nation's 20 largest banking companies. The company remains
committed to its previously announced long-term Financial Performance
Guidelines.
REVISED EARNINGS OUTLOOK
Contributing factors to the company's revised earnings outlook for 1999 of $3.40
to $3.50 per share include:
o REVENUE-RELATED FACTORS OF 27 TO 32 CENTS PER SHARE:
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1) CORESTATES
Revenue growth in the former CoreStates territory lags original expectations due
to acquisition integration and the concurrent implementation of the Future Bank.
2) FUTURE BANK
The Future Bank project represents a major redesign of First Union's traditional
distribution channel and transition to an Internet strategy. Implementation of
Future Bank includes approximately 25,000 people throughout 2,400 branches and
involves over 800,000 hours of training as branch sales personnel are selected,
trained and become seasoned in their new roles. The Future Bank implementation,
when coupled with new delivery channels such as the Internet, will in time
dramatically change the configuration of the traditional branch channel.
3) SECURITIES GAINS
The company, which has taken $25 million in securities gains in 1999, does not
plan to take the additional securities gains in 1999 contemplated in the
previous outlook.
o EXPENSE-RELATED FACTORS OF 21 TO 28 CENTS PER SHARE:
1) INTERNET
Further development of First Union's distribution channels includes an
accelerated Internet expansion strategy. The company expects to double the
number of Internet customers from 700,000 currently to more than 1-1/2 million
by year-end 1999. The company's goal is to grow that number to 5 million by
2001.
2) EVEREN
The previously announced acquisition of EVEREN will give First Union a
nationwide brokerage distribution platform and is an important part of the
company's new asset gathering and securities distribution model.
3) LOAN LOSS PROVISION
First Union expects that its loan loss provision will be approximately
$90 million to $110 million above its earlier outlook of $600 million. At this
level the provision would approximate expected net charge-offs of 0.48 to 0.52
percent of loans. This would rank among the best net charge-off ratios of the
nation's 20 largest banking companies.
4) MISCELLANEOUS
In addition, the revised outlook includes other miscellaneous items, principally
expenses, amounting to 7 to 10 cents per share.
STRATEGIC FOCUS
First Union's new business model is premised on expanding its distribution
capabilities, including building an Internet presence second to none in the
financial services industry. The new model is also premised on nationwide
brokerage activities provided by Wheat First Union, EVEREN and First Union
Brokerage. The company expects continued investment in products, distribution
and "intellectual capital" to support an integrated Capital Markets and Capital
Management strategy.
First Union's transformation to a new business model requires significant
investments of approximately $500 million in 1999 in First Union Capital
Markets, Capital Management, Future Bank and the Internet. These investments,
which are embedded in the revised outlook, are expected to provide a platform
for core revenue growth in 2000 of approximately 10 percent.
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Earnings in the company's Capital Markets and Capital Management businesses are
expected to grow at a double digit rate annually over the next five years.
STOCK REPURCHASE PROGRAM
First Union today also announced a new authorization to repurchase up to 50
million shares of its common stock.
First Union (NYSE:FTU) is a leading provider of financial services to more than
16 million customers throughout the East Coast and the nation. At March 31,
1999, First Union had assets of $223 billion and total stockholders' equity of
$16 billion. The company operates full-service banking offices in Connecticut,
Delaware, Florida, Georgia, Maryland, New Jersey, New York, North Carolina,
Pennsylvania, South Carolina, Tennessee, Virginia and Washington, D.C.
This news release contains various forward-looking statements. A discussion of
various factors that could cause First Union's actual results to differ
materially from those expressed in such forward-looking statements is included
in First Union's filings with the SEC, including a Current Report on Form 8-K
dated May 25, 1999.
