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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 Act of 1934
Date of Report (Date of earliest event reported): March 29, 1995
CoreStates Financial Corp
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(Exact name of registrant specified in its Charter)
Pennsylvania 0-6879 23-1899716
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(State or other (Commission (IRS Employee
jurisdiction of File Number) identification No.)
incorporation)
Centre Square West, 1500 Market Street
Philadelphia, Pennsylvania 19101
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(Address of principal executive offices) (Zip Code)
Registrant's telephone, including area code: (215) 973-3806
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(Former name and former address, if changed since last report)
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Item 5. Other Events.
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The information set forth in the news release of CoreStates Financial Corp
as Exhibit 99 is incorporated by reference and made a part hereof.
Item 7. Exhibits
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99 CoreStates Financial Corp News Release dated March 29, 1995.
SIGNATURE
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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.
CORESTATES FINANCIAL CORP
(Registrant)
By /s/David T. Walker
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David T. Walker
Deputy Chief Counsel
Dated: March 29, 1995
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Exhibit Index
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Exhibit No. Page
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99 CoreStates Financial
Corp News Release
Dated March 29, 1995 4
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Gary Brooten, (215) 973-3546
Immediately Upon Receipt
CoreStates Announces Customer-Oriented Corporate Redesign,
Outlines Anticipated Financial and Staffing Impacts;
Reports Earnings Estimate and Expanded Stock Repurchase Program
Philadelphia, March 29, 1995--CoreStates Financial Corp today
announced a corporate redesign to restructure its banking services around
customers and to give employees more authority to make decisions to
benefit customers. The redesign incorporates efficiencies expected to
improve earnings at the annual rate of 90 cents per share by late 1996.
It will eliminate 2,800 positions by mid-1996, of which 890 will be
layoffs. The company also announced projected earnings for the first
quarter of 1995, a restructuring charge of $110 million and an expanded
stock repurchase program.
"We have designed a platform from which to serve our customers
competitively into the 21st century," Terrence A. Larsen, chairman and
chief executive officer, said of the corporate redesign. "We set out last
fall to strengthen our customer focus, to speed up the culture changes
already underway at CoreStates, and to improve productivity. While most
of the changes will not be visible immediately, this redesign achieves
all three goals
in ways that should become clearly apparent over the coming 18 months to
our customers, employees, communities and shareholders."
Larsen said the redesign project, which will be implemented over the
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next 18 months, is expected to have a positive impact of about 16 cents
per share on 1995 results (excluding the restructuring charge) and to
reach an annualized benefit of 90 cents per share by the fourth quarter
of 1996.
CoreStates said it expects first quarter operating earnings of 79
cents per share, compared to 68 cents a year ago. Both numbers exclude
major one-time charges, and this year's number also excludes a one-time
gain of eight cents per share from changes to CoreStates' investment in
its Electronic Payment Services, Inc. joint venture. Adding the EPS gain
and subtracting the $110 million restructuring charge, which is equal to
49 cents per share, CoreStates' estimated net income for the quarter is
38 cents per share.
Larsen said CoreStates' directors have authorized an expansion of
its stock repurchase program from a maximum of 2% of outstanding shares
to 5% per year, excluding purchases for benefit and incentive programs
and the dividend reinvestment plan.
Changes in Process and Structure
The seven-month redesign process was called BEST, for Building
Exceptional Service Together. It was led by CoreStates' five-member
Office of the Chairman, advised by the firm Aston Limited Partners of New
York.
Its outcomes will include changes in the organizational structure
and processes CoreStates uses to serve its key markets. Parallel changes
will make corporate support structures and processes more responsive to
the needs of the individuals and teams who serve customers directly,
Larsen said.
The changes involve a realignment and flattening of the top ranks of
managers reporting to the four individuals who, with Larsen, make up the
Office of the Chairman. (See attachments for organizational details.)
Banking Businesses
In the new banking structure reporting to Rosemarie B. Greco,
president and chief executive officer of CoreStates Bank, delivery
channels as
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well as products will be tailored to the needs of customer groupings --
geographic, demographic or industry-specific.
CoreStates will organize most of its customer interactions by four
geographic markets, each headed by a market president with full
responsibility within the market geography for satisfying all individual
customers and all business customers with annual sales up to $250
million. Over time branch offices within each market will be reconfigured
in a version of what is known in the industry as the "hub and spoke"
model, with large full service branch offices surrounded by more narrowly
focused satellite offices.
All offices, even the smaller ones, will be staffed to address needs
and opportunities reflected in localized demographics and economics;
where the market requires specialized skills or delivery methods, they
will be placed in the market. The BEST process resulted in adoption of
more than 100 ideas to streamline branch office procedures so that staff
can spend more time with customers and out in the communities.
"The resources needed for decision making in a local marketplace
will be available there," said Greco. "This will enhance the local
autonomy that has served us well in our markets. There should be no need
to go to Philadelphia for decisions on customer needs in Harrisburg or
West Chester or New Brunswick."
The geographic market structures will be supported by customer
segment teams focusing on common needs, across CoreStates' entire
geography, of distinct segments among consumers and businesses. These
teams will carry out market research and product development functions
for the segments and provide support to help the market presidents serve
each segment.
As part of branch reconfiguration, 37 of CoreStates' 371 domestic
branch offices are expected to be closed over the next year. CoreStates
said that as details are firmed up, customers will be informed of nearby
branches to which
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their accounts will be moved, and appropriate public announcements will
be made. As in previous branch consolidations, CoreStates said it expects
to offer jobs to employees of the affected branches.
Teams serving large corporations and specific industry segments will
continue to be based in Philadelphia, but will also support the market
presidents where their particular expertise is relevant. CoreStates'
substantial global correspondent banking business remains in Philadelphia
and New York, and its investment banking businesses will be consolidated
and managed from Philadelphia.
Third-Party Processing Businesses
Completing a process that had begun before BEST, all of the third-
party processing businesses will be combined under a single management
team led by Robert N. Gilmore, chief technology and processing services
officer. These include Transys (check processing), CashFlex (remittance
processing) and Synapsys (credit card-related processing). They are under
an umbrella organization, QuestPoint, which will provide common product
development, marketing and technology functions. These businesses
primarily address the specialized processing needs of financial
institutions as they disaggregate their processing functions and
outsource many of them.
Larsen said CoreStates' commitment to building these businesses is
unchanged by the BEST process.
Technology support activities that report to Gilmore also have been
restructured for better focus on customer needs.
Staff and Support Functions
The support staff functions reporting to Charles L. Coltman III,
president and chief operating officer of the corporation, are being
significantly reorganized to group similar functions together and to
reduce
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bureaucracy and unnecessary paperwork. One idea in the BEST process
identified internal reports that can be eliminated, saving $500,000 a
year in paper costs alone.
"BEST has enhanced our employees' focus on serving the customer. Our
support services are being redesigned to help them do it," said Coltman.
All of the major risk management functions -- for credit, interest rate,
compliance and operational risks -- are being grouped together under
Charles P. Connolly, Jr., senior executive vice president responsible for
risk management. Changes will include a strengthening of the core credit
review process. Risk management expertise will continue to be available
in the markets to support local decision making.
"We've found ways to reduce red tape and paper substantially without
fundamentally altering our risk profile or changing our practice of
aggressively managing risks," said Connolly.
Automation
A major theme of the BEST ideas and decisions was increased use of
technology to improve customer service, to become more cost-efficient and
to empower employees. "We've made a major commitment to build further on
our long-standing use of technology as a competitive tool," said Larsen.
"Most of our ideas for automation came from people who are very
close to customers," he said. "There were many relatively small ideas
that made great sense, and that will give us quick results."
Larsen said the BEST process generated more than 6,000 ideas from
employees, customers and directors, of which more than 3,500 ideas are
being implemented over the next 18 months.
"The people of CoreStates worked very hard and achieved a great deal
in this project," Larsen said. "They sustained their regular work and the
company's strong financial performance. Many actually increased their
calling
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on customers. They consolidated two bank acquisitions. And they
contributed long hours to BEST -- knowing that their own jobs would be
placed at risk in the process.
"I can't say enough about the quality of the effort that our people
have put into this process -- the people who are staying in the
redesigned CoreStates and the people who are leaving."
Job Reductions
The process will result in a total reduction of 2,800 positions, or
2,600 in full-time equivalents. That reduction represents about 19% of
the 14,000 full time-equivalent employment at CoreStates, though with
only 890 anticipated layoffs. The breakdown of the 2,800 total is as
follows:
450 vacancies resulting from hiring freeze since September;
930 chose enhanced separation package;
530 vacancies expected from attrition;
890 actual layoffs.
"It is sad to say goodbye to so many colleagues and friends, and the
layoffs especially are the most unhappy aspect of this process," said
Larsen. "But it is a reflection on the tough realities of being in the
banking business in the 1990s, and not on the individuals.
"Our collective action will result in a much stronger and better
company, with benefits to our stakeholders. We will have strengthened our
competitive position and thereby greatly reduced the prospect of future
pressures that could put even greater numbers of jobs in jeopardy. We can
look forward with confidence that we will be able to serve our customers,
support our communities and reward our shareholders and employees more
effectively and efficiently well into the future."
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SUMMARY OF FINANCIAL DATA
<TABLE>
<CAPTION>
Estimated First Quarter Earnings - Per Share
<S> <C>
Operating Earnings $ .79
Electronic Payment Services, Inc.
Affiliate Transaction Gain .08
BEST Restructuring Charge (.49)
Net Income $ .38
=====
</TABLE>
<TABLE>
<CAPTION>
Summary of BEST Impact
<S> <C>
(in millions)
Net Expense Savings* $180
Revenue Enhancements* 30
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Annual Pre-Tax Impact* $210
====
One-Time Restructuring Charge $110
====
</TABLE>
*These are annual rates that are expected to be reached by
the fourth quarter of 1996.
<TABLE>
<CAPTION>
Summary of Head Count Reductions
Sources of Eliminations
<S> <C>
Hiring Freeze 450
Chose Enhanced Separation Package 930
Planned Attrition 530
Layoffs 890
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Total Positions Eliminated 2,800
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</TABLE>
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